Tough times have been commonplace for Parkview Community Hospital in Riverside, Calif. However, the U.S. Department of Housing and Urban Development may have put it on more level ground.
Parkview became the first facility in the country last month to receive a loan through a revised 242/223(f) HUD program that allows hospitals to refinance existing debt without having to use it for capital projects, confirmed HUD spokesman Lemar Wooley.
HUD typically had required at least 20 percent of a loan's proceeds to be used for capital projects, but relaxed that restriction after the 2008 financial crisis made it more difficult for hospitals to access capital. The agency will loan $300 million or more to a single hospital.
The $29 million loan from HUD replaces bridge financing Parkview scrambled to obtain about a year ago from a consortium of local physicians, health plans and other entities. That had been obtained to stave off a takeover by for-profit hospital operator Prime Healthcare, which had bought Parkview's debt and was moving to assume control of the hospital after it had missed a payment.
The new loan is at a 5 percent interest rate, compared to the 20 percent rate Parkview was paying on the bridge financing. Hospital spokeswoman Marlene Burnett said the refinancing could save it up to $3 million a year.
Parkview has always had ongoing financial issues: The 193-bed facility filed for bankruptcy protection in 2002 after losing its accreditation to participate in the Medicare and Medicaid programs. Although since reinstated, it has had other financial and quality-of-care issues in the intervening years, and was nearly foreclosed on by another hospital operator in 2009.
As a result, Parkview will be able to purchase new equipment for its neonatal intensive care unit, and eventually expand its emergency room, Burnett said. And in addition to the HUD loan, Parkview also was able to negotiate a $2.2 million line of credit to help pay off fees associated with the old bridge financing.
It took 18 months for Parkview to get through the application process, but the outcome leaves hospital officials without any complaints. "The HUD people were extremely helpful," Burnett said.
Whether HUD will be able to spread this program far and wide remains to be seen. Wooley said the agency projected as many as 20 hospitals would apply for the refinancing program, but only 13 have applied so far. He expects just two loan fundings during calendar 2011, and perhaps not more beyond that.
"The major problem with hospitals that did not qualify was that they had poor financial performance records that would not be resolved by the...refinancing," Wooley said. "In addition, several of the hospitals also had outstanding obligations that were ineligible for refinancing under the program."
If Parkview is the one happy ending from this story, that's better than nothing. But no doubt there are other hospitals out there who could use a helping hand from HUD. - Ron