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Capital Link - Background

Access for All Arkansans Capital Needs Planning CHCA Annual Conference Little Rock, AR June 14, 2010 Presented by Jonathan Chapman, Capital Link Project Consultant. Capital Link - Background.

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Capital Link - Background

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  1. Access for All Arkansans Capital Needs Planning CHCA Annual Conference Little Rock, AR June 14, 2010 Presented by Jonathan Chapman, Capital Link Project Consultant

  2. Capital Link - Background During the past 11 years, Capital Link has worked with over 800 community health centers, Primary Care Associations and networks throughout 50 states, Washington D.C. and Puerto Rico. To date, Capital Link has assisted health centers in obtaining $428 million in financing for 190 capital projects totaling $569 million.

  3. Overview Capital Needs Planning Capital Needs Survey/Economic Impact Analysis Stimulus and Health Reform (as we understand them today)

  4. The Capital Project Development Process

  5. The Capital Project Development Process

  6. Readiness Mission and Vision Financial Systems and Position Community Collaboration Board of Directors Support and Participation Ability/History of Capital Campaigning

  7. Planning Preliminary Project Concept Work Plan Development Market Assessment Program and Staff Planning Space Planning Sources and Uses of Funds

  8. Design Project Team Refine Project Budget Site Control – Land Use Architectural Design FF&E

  9. Financing • Develop and Refine Plan • Business Plan • Identify and Secure Funding • Government • Capital Campaign • Debt • Internal

  10. Construction Documentation Contractor Selection Construction Process Move Out/Move In Logistics Punch List

  11. Start-Up Marketing and Outreach Purchasing Plan Billing and Financial Transition Licensing, Fees and Permits

  12. Capital Needs Survey • In 2007, six health centers indicated a need for $15.3MM in capital projects • Estimated 2% funding from equity and fundraising…98% from grants and loans • Leading technical assistance needs were: • Economic Impact Analysis • Financing Assistance • Grant Identification/Writer • Business Plan Development

  13. Capital Needs Survey • In 2010, twelve health centers indicated a need for $39.1MM in 21 capital projects • Estimated 48% of funding was identified • To serve an additional 48,000 patients • As part of a national effort to serve 30 million patients by 2015, Arkansas centers are working to expand access to an additional 120,000 residents • Leading technical assistance needs were: • Strategic Planning, Financing Assistance, Financial Analysis, Business Plan Development

  14. Economic Impact Analysis • In 2006, six centers reported $42.5MM in payroll for 449 jobs • Resulting in a total economic impact of $73.0MM and 831 jobs • In 2008, twelve centers reported $70.6MM in payroll for 760 jobs • Resulting in a total economic impact of $116.8MM and 1,213 jobs

  15. Combination of “equity” and debt • Maximum loan amount is dependent on a center’s “debt capacity” • Difference between project costs and debt capacity = needed “equity” • “Equity” for a health center generally means: • Cash generated from operations • Grants and donations from public and private sources How do health centers pay for capital projects?

  16. Capital Funding Challenges • Some grant funding, but never enough • The difficult lending environment is here for the foreseeable future; interest rates will likely head higher • NMTC will continue to be in short-supply and leverage loans will remain challenging • Latest round of NMTC allocation produced 250 applications requesting $23.5B. $5B is available. • And meanwhile the pressure on PCAs and FQHCs to open new sites, expand, etc. will be very high

  17. Stimulus and Health Care Reform Yes, A Very Big Deal Health Reform and Health Centers

  18. Funding Levels $11 Billion over 5 years (dedicated funding), over and above the $2.2 billion in annual CHC funding $9.5 billion for CHC operations under Sect. 330 $1.5 billion for capital projects over 5 years New Funding for Health Centers

  19. Health Reform – Funding Growth Chart * Does not include $1.5B for capital projects

  20. Health Centers- Construction and Renovation $1.5 billion over 5 years No specific instructions, but only for construction and renovation (not HIT, not acquisition) HRSA has authority to decide how to spend Prevailing Wage Not Required Rumor: Partial FIP fund down 1st, grant program later Timing: Late June Announcement/October Award FQHC Capital Funding

  21. Access to funding for growth and expansion Unclear how new funding will be distributed Managing growth will continue to be a challenge Need for state-wide planning is paramount Recruiting staff – especially clinical staff – will be a challenge NHSC will need to be marketed aggressively ALL health centers need to increase involvement in training of ALL levels of needed clinical professionals Facility space and equipment will continue to be a major challenge Physical capacity building critical Adequate and attractive space needed

  22. Health Reform: What Might It Mean? MORE Patients with Insurance Coverage FEWER employer-insured patients and many MORE Exchange-enrolled patients FEWER uninsured patients, but they will account for a HIGHER PERCENTAGE of all uninsured Medicare patient population will grow dramatically over the next decade

  23. Health Reform: What Will It Mean to Payor Mix? Current (2009) Patients by Payer Source Post-Reform (2015)Patients By Payer Source Exchange 7% Private 16% Private 12% Medicaid 34% Medicaid 42% Uninsured 26% Uninsured 39% CHIP 2% Medicare 8% Other Public 1% CHIP 4% Other Public 1% Medicare 8% NOTE: Medicare patients will grow significantly over the next 10 years

  24. So What Didn’t Happen? • Cost containment still a challenge • Existing Annual 330 Appropriations Not Guaranteed • Although bill is paid for, cuts happen later • “Capital Tools” not included • Loan Guarantee Program funding is running out • Estimated $10.5B in capital funding needed to reach 30 million patients (only $3B provided)

  25. Soooo…how do we • Get projects moving ASAP? • Collaborate with other PCAs and FQHCs in planning for growth? • Accurately forecast patient growth and payor mix? • Support pursuit of newly insured patients? • Prepare for expected growth in an unexpected environment? Key Questions

  26. Who will succeed? Successful PCAs and FQHCs will be those who are willing to take calculated risks in an uncertain environment and who have a well-founded plan to manage the downside risk (PROACTIVE) The need for rapid growth will likely benefit those PCAs and FQHCs that have already achieved a certain level of scale and/or experience. Passive organizations will not succeed

  27. “Good plans…help to make elusive dreams come true.” Lester R. Bittel, The Nine Master Keys of Management Jonathan Chapman – jchapman@caplink.org – (225) 927 – 7662 x207

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