New NJHCFFA Loan Program Helps Start-Up FQHCS

(Trenton) The New Jersey Health Care Facilities Financing Authority (the "Authority") is announcing a new loan program that will ease the burden of start-up costs for Federally Qualified Healthcare Centers ("FQHC").

FQHCs are community-based health centers designed to care for medically underserved low-income or indigent patients. Being under- or non-insured, this population tends to wait for a health matter to become critical before receiving medical treatment, which is often provided in a hospital emergency room. When this happens, the patient's condition has been unnecessarily worsened due to a delay of action, the services are provided at a higher cost since they consume emergency resources, and the hospitals are often reimbursed very little, if at all, for the care provided.

FQHCs are able to provide this population with out-patient primary care, preventive care and some specialty care. By using facilities specifically designed for this purpose, the services can be provided in a much more cost-efficient manner. Further, patients are able to maintain good health, which, in addition to improving one's quality of life also reduces health care costs in the long run.

"FQHCs are an integral part of New Jersey's goal for a more rational health care system," says William Conroy, representing the New Jersey Department of Health and Senior Services. Unfortunately, because start-up FQHCs cannot demonstrate an established financial track record, it can be difficult for these organizations to get cost-effective financing. By meeting strict federal standards, FQHCs do receive start-up funding from federal grants, charitable contributions and, occasionally, hospitals; however, they are often forced to seek the remainder of these costs through conventional bank loans, sometimes with interest rates in the double digits.

Through the Authority's loan program, these start-up costs could be financed at a monthly variable rate equal to the monthly interest rate paid by the New Jersey Cash Management Fund plus 200 basis points. In today's market, this results in an interest rate of approximately 2.5%.

Once in operation, FQHCs receive cost-based reimbursement for Medicaid patients and free malpractice coverage under the Federal Tort Claims Act, which is a significant saving for the provision of medical care. Still, these loans will carry considerable risk for the lender. Therefore, the Authority will carefully review the applicants, which will be required to provide: historic financial information and audits, a current budget, three-year projections, utilization statistics, all documentation from existing outstanding loans and grants, a copy of the Section 330 approval qualifying it as an FQHC, curriculum vitae for key staff and the Board of Directors, and a letter from the IRS confirming its 501(c)(3) status. Further, the Authority will require security in the form of a mortgage and/or a lien on the gross revenues or accounts receivable of the FQHC.

"We are very excited about this program and its potential to ease some of the financial burden of hospital-provided charity care," says Mark Hopkins, the Authority's Executive Director. "My one regret is that we have a very limited amount of funds available to lend to these organizations at this point. That is one of the reasons we thought this program would be a good fit for us, though. Often, these FQHCs need only a few hundred thousand to a couple million dollars to fill that gap of costs needed to get up and running."

The loan program will be a revolving pool, so that as the principal and interest on each loan is repaid, those funds can be lent to another start-up FQHC. The Authority hopes to be able to add to the loan pool with future increases in its fund balance. "If it facilitates the extension of healthcare coverage and takes some of the stress off hospitals, it has my support," says Ulysses Lee, a Public Member who sits on the Authority's six-member Board, all of which championed the program.

For more information on this loan program, contact the Authority at info@NJHCFFA.com.

The Authority was created in 1972 by an act of the Legislature to provide not-for-profit health care providers with access to low-cost capital. It is the primary issuer of municipal bonds for New Jersey's health care organizations. During its 35+ year history, the Authority has issued over $16 billion in bonds on behalf of over 145 health care organizations throughout the state.

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