Thursday, October 27, 2011
Idea to solve primary-care crisis, create jobs and help banks: Build health centers with SBA loans
The federal health-care reform law will mean a glut of new patients who will be newly insured and bog down the primary-care system. Thousands of construction workers are out of jobs as the economy remains stagnant. And the banking sector is still reluctant to lend. The answer to all three problems? Build more community health centers, writes Jeffrey Leonard in an opinion piece in The Washington Monthly. (Photo: Vista, Calif., Community Clinic)
"The way to meet the flood of new patients coming down the pike is to expand the nation's existing network of community health centers — nonprofit clinics that offer primary care to the medically under-served, often in rural areas or inner cities," writes Leonard, CEO of the Global Environment Fund and chairman of the magazine's board of directors. "But to get this done, there's no need to appropriate billions more in direct government spending. Rather, there is a way to lure skittish banks in lending private capital to finance a health-center construction boom in all 50 states, simply by tweaking the language of an existing federal lending program."
Though community health centers generally have difficulty raising their own funds to expand or build facilities, in part because they serve uninsured, low-income patients who can't donate to building projects, they are sound investments, Leonard contends, pointing out only "one or two" of the 1,200 community health centers in America today have ever defaulted on a loan.
Still, they have trouble getting loans from banks, even once they have been able to raise a chunk of funds, in large part because centers "in an economically distressed inner-city neighborhood serving a mixture of Medicaid patients and the uninsured, or one in a depressed heartland town where real estate prices are spiraling downward" are seen as a risk, Leonard explains.
Leonard suggests the centers be eligible for the Small Business Administration's 504 loan program, in which a small business asks a non-profit lender to issue "low-interest, fixed-rate, government-backed bonds to finance up to 40 percent of the project," Leonard writes. As of now, the loan program is only open to some for-profit businesses. But Congress could change that, thus opening up possibilities. Moreover, the loan program is "routine and efficient to process" and the "interest rates are among the lowest on the market," Leonard contends.
Another option would be for construction companies and real estate developers to put up the equity themselves, build the facilities and then rent them out to nonprofits "on a long-term lease or through various lease-to-own arrangements." "Indeed, hungry developers and construction firms would find any number of ways to get the hammers swinging," Leonard writes.
Overall, it's a win-win, Leonard argues."It's hard to imagine Congress appropriating any more direct spending to fuel the construction of health centers," he writes. "But there's no good reason why they shouldn't change a few words in a statute to achieve the same end. Not only would it quickly create much-needed jobs in the construction trades, it would also spark economic activity over the long run in some of the places in America that need it most." (Read more)