Q: Has access to financing become any easier for hospitals?
Claudia Gourdon: There has been some improvement in the credit markets, meaning that more capital is more available. So, yes, access to financing has improved for hospitals generally.
Q: What has this meant for hospitals? In your experience, what kind of projects are hospitals looking to fund?
CG: Hospitals are starting to take projects off hold. These are mostly capital improvements that may have been shelved when the economic crisis hit. Over the last year or so, hospitals have been restricted to their “must-do” maintenance; now, they are beginning to do the slightly larger projects, although many of those projects are still relatively basic. Now that some capital has opened up, hospitals are moving ahead on their previous plans.
In addition, I have heard a few initial conversations from hospitals looking into larger expansions, but it is unclear when the hospitals will move ahead with these plans.
Q: Other than capital projects, what other kinds of transactions or financings have you seen in the current market?
CG: Mergers and acquisitions are being discussed. We are still seeing hospitals that are struggling and they are looking for a merger partner or to be acquired by a stronger entity. With growth in the credit market, some stronger systems are starting to be more aggressive in their acquisition of weaker partners, whereas in the past they might have been less willing to aggressively pursue a merger.
There also has been increased interest by hospitals to seek [Department of Housing and Urban Development] financing. However, I’m not sure of how many actual completed transactions have been financed.
Healthcare reform is also encouraging some hospitals to be more positive about their growth possibilities because they believe that they have a greater chance of receiving funding from their states. This optimism, while guarded, is encouraging hospitals to think about financing growth projects that they might not have previously considered.
Q: What advice do you have for hospitals looking to gain financing in the current market?
CG: Although more money is available, financing firms are still looking for the same quality as they were six months ago. There is increased willingness on the part of lenders to provide more money, but lenders are still cautious about lending money to hospitals with questionable credit quality. Financing firms are more aggressive when lending to stronger hospitals, but are still cautious when it comes to weaker hospitals.
Contact Claudia Gourdon at (203) 869-6768 or cgourdon@hfgusa.com. For more information about HFG, visit www.hfgusa.com.