Capitalizing on record-low interest rates, hospitals are moving to refinance their debt.
For instance, Morehead Memorial Hospital in Eden, N.C., refinanced $40 million worth of debt and will save about $5 million in interest payments, reported the Greater Triad Business Journal.
"I cannot overemphasize the profound impact this refinancing will deliver to Morehead's bottom line and its ability to reinvest in our hospital and its personnel," CEO W. Carl Martin told the Business Journal.
"To lower our interest rate by almost one-percent, improve our twelve-month cash flow by $630,000, and produce debt service savings of $240,000 per year for each of the next 19 years, without any increase in our loan amount or cash outlay is the ultimate win-win."
In another significant example, the Medical University Hospital Authority in Charleston, S.C., refinanced $361.4 million worth of debt under the Federal Housing Authority's Section 242 loan program. The transaction will reduce the hospital authority's interest payments by about 38 percent over the life of the loan, according to a statement.
More needy hospitals may look into such transactions since the U.S. Department of Housing and Urban Development revised a program that allows hospitals to refinance existing debt without having to use it for capital projects.