According to the Lenders Coalition for Community Health Centers (LCCHC), nearly 62 million Americans do not have a regular source of primary health care—which means that instead of seeking preventive health measures, they are often interacting with health care systems at the emergency department of a hospital or urgent care facility.
Expanding access to preventive health care in underserved communities is best achieved through community health centers. Nearly 1,400 community health centers (CHCs) operate over 10,000 locations across the US, from rural to urban communities, providing care (including mental health care) to more than 25 million low-income Americans. Through the Community Health Center Loan Guarantee Program, administered by the federal Health Resources and Services Administration (HRSA), HRSA provides up to an 80 percent federal guarantee to private lenders on loans made to CHCs.
One group advocating for greater resources for the HRSA Loan Guarantee Program is the LCCHC, which consists of 25 CDFIs. CDFI Connect spoke with Anne Dyjak, Managing Director, Capital Investment at Primary Care Development Corporation, who leads the coalition, to learn more about their recent win in the FY18 Appropriations Omnibus, as well as how other CDFIs can utilize and help advocate for the HRSA Loan Guarantee Program which benefits many of the communities they serve.
What are the needs of Community Health Centers?
There is great need for capital to support the expansion of services and integration of care, as well as to serve more patients. CHCs may need to acquire new property and undertake expensive construction or renovation to develop and outfit new facilities or accommodate a co-located provider. For many years CHCs have been thinking more broadly about how to provide care for mental health, substance use treatment, dental, vision, and other services that address the social determinants of health.
In addition, the transformation needed to achieve changes in healthcare delivery system and payment reforms requires capital for infrastructure investments, including retraining or expanding workforces and upgrading technology.
There is an increase in patient demand for CHCs, what are some of the reasons for this?
There are two primary reasons. First, many areas in the country have an inadequate supply of providers. This is particularly evident in low-income communities, where there are high levels of Medicaid-insured or uninsured patients and few private clinicians willing to care for these patients. CHCs receive more adequate reimbursement from Medicaid and are equipped to serve Medicaid-insured and uninsured patients.
Second, with the implementation of the Affordable Care Act, many states expanded Medicaid eligibility, enabling millions of patients to access Medicaid. Though the CHCs deliver care to the uninsured, typically through a sliding fee scale based on the ability to pay, the payments are insufficient to cover the costs of care for these patients. Medicaid expansion, which provides a reliable source of revenue to care for Medicaid-eligible patients, has been a driver in CHC service expansion.
What is the Community Health Center Loan Guarantee Program?
In the late 1990s HRSA developed the Loan Guarantee Program for Health Center Facility Projects as a stimulus to entice lenders to provide capital to CHCs. The program creates a credit enhancement to protect lenders against real and perceived risks in lending to CHCs.
Recognizing that CHCs were finding it difficult to access affordable financing—and understanding that a small pool of public capital can be catalytic to stimulating private investment—HRSA established the program to provide lenders a guarantee of up to 80 percent of the loan. At the time of its inception, Congress appropriated $14 million as a credit subsidy that provided lending authority to HRSA for guarantees on up to $160 million in loans.
How is this program beneficial to CDFIs? What about CHCs?
The program helps a CDFI lend to CHCs as it mitigates risk by providing a commitment for an additional source of repayment. A number of CDFIs currently lend to CHCs, including our coalition members, who understand the unique CHC revenue model. For example, CHCs generally have very thin margins and rely on some portion of revenue from federal Section 330 operating grants administered by HRSA, which helps fund care to uninsured patients as well as some otherwise unreimbursed services. This is an unusual model which many traditional lenders view as risky.
In addition, the federal Community Health Center Program, which provides 70 percent of the operating support to CHCs, has been on a cycle of short-term, 2-year extensions since 2015. When you consider that many lenders provide loan terms of 7 to 10 years, the value of the Loan Guarantee Program to lenders in mitigating risks unique to CHCs is clear.
Absent the Loan Guarantee Program there is a potential for some lending institutions to retrench their lending activity to CHCs during times of financial uncertainty. If we as CDFIs do not support CHCs at times when resources are needed most, who else will? This program is critical in maintaining an uninterrupted flow of capital to CHCs, so that they can continue to serve low-income communities.
How did the coalition work to increase awareness of this need and advocate for the Loan Guarantee Program? What was the outcome of these efforts?
Since the Coalition’s founding in 2013 we have worked to find ways to support CHCs. A priority has been the Community Health Center Program, especially given the recent history of short-term funding extensions. These extensions have forced health centers to the edge of a “fiscal cliff” every two years, throwing essential funding for operations into question. The LCCHC and our membership advocate on the CHCs’ behalf to ensure that their funding is stable and accessible.
We've also partnered with the National Association of Community Health Centers (NACHC) and HRSA to identify modifications to the Loan Guarantee Program that would make it more appealing and usable by lenders. With support from The Kresge Foundation, the LCCHC commissioned a study of a variety of federal guarantee programs to determine which worked well and could be incorporated into the Loan Guarantee Program.
Using this research, combined with the experience of the coalition members, the LCCHC provided a series of recommendations that will inform HRSA’s program refinements, which we anticipate will be implemented in the next fiscal year.
Facing the exhaustion of the existing authority this past year, the coalition has also been pressing to expand HRSA’s Loan Guarantee authority. After partnering with HRSA and NACHC to advocate for additional appropriations and authority, we were successful this year as Congress approved an additional $20 million in credit subsidy for the Loan Guarantee Program, which will result in $880 million of lending authority to HRSA to provide guarantees. This will go a long way in providing credit enhancement to stimulate investments at a critical time of uncertainty as Congress considers reforms that could impact CHCs.
Who, besides CDFIs, are meeting the need for Community Health Centers?
Besides CDFIs there are a number of banks, particularly local and regional banks in certain geographic markets, that are direct lenders to CHCs. In addition, certain states have been innovative in developing designated grant programs and bond financing programs that suit not only large hospitals and systems but also CHCs.
How can CDFIs partner to help CHCs in their community if they do not directly serve them through this program?
LCCHC members that are active lenders to CHCs tend to be loan funds; however, CDFI banks and credit unions can be helpful by providing depository services for CHCs and financial literacy programs to their patients.
In addition, partnership opportunities exist to meet the comprehensive needs of the community through thoughtful planning and financing, with various CDFIs contributing capital in their respective areas of expertise. We have CDFIs actively collaborating to finance projects in healthcare, affordable housing, healthy foods, and senior services, for example.
How can CDFIs work with the coalition?
We welcome the participation of anyone interested in working with the community health centers. Many members in our coalition are happy to work with CDFIs that seek to enter this sector, by partnering and co-lending so they may learn as they go, alongside an experienced partner.