Stories of closure: Rural hospital feels pain of loan freeze
The partial government shutdown, now in its 32nd day, has dried up a key cash flow for at least one rural hospital: a low-interest $ 3.2 million rural development loan from the US Department of Agriculture.
In the case of the small nonprofit medical center in Pecos, New Mexico, the USDA funding shutdown freeze also halted funding for an expensive construction project when the loan officer left in leave. The project, a 9,000 square foot extension to consolidate all of its treatments into a single building, is expected to be completed in August.
The issue was revealed Thursday in a letter from New Mexico Democratic Representative Ben Ray Luján, whose district encompasses the service area of the affected Pecos Valley Medical Center. Luján has written to Agriculture Secretary Sonny Perdue asking for immediate help in resuscitating the funds. The lawmaker was still in talks with the department Tuesday morning.
These low interest USDA loans are attractive to rural hospitals, but they are also difficult to obtain. They demand high credit scores that often elude troubled suppliers.
Under the rules that govern these loans, Pecos Valley Medical Center had to secure bridge financing from a local bank to pay the contractor each month. Once the project is completed, the USDA will repay the bank loan and the hospital will then make its mortgage payments directly to the federal government.
But members of a specific USDA team must sign each time the hospital draws funds from the local bank responsible for the interim loan. These officials have been placed on leave for the duration of the closure as non-essential staff.
The contractor’s $ 103,000 invoice for December fell due the first week of January. At first, the hospital was able to save time. But as the shutdown dragged on, breaking records like the longest in U.S. history, that changed, according to Kevin Norris, CEO of Pecos Valley Medical Center.
“Last Wednesday, on a call with the contractor, they made it clear that if they weren’t able to pay them, they would close their doors yesterday,” Norris told Modern Healthcare on Tuesday, referring to January 21 holiday in honor of Dr. Martin Luther King. Jr.
Norris and the entrepreneur were able to strike a deal and the hospital has a week’s grace period to resolve the money issue. By next Monday, Norris is hoping that Luján can strike a deal with the USDA, or that the hospital can get a line of credit. But neither of the two options is guaranteed.
The line of credit would add substantial expenses to the project, as well as a temporary shutdown of the project.
“If they stop, they will remove equipment and workers from the site,” Norris said. “So when they come back it will increase the costs of the project – it would be substantial for us, and we’re not a huge clinic, so we can’t absorb that.”
If the hospital is able to take out another loan, it is an additional 5% interest payment until the government reopens.
“And so, it just keeps snowballing,” Norris said.
The hospital serves a 500 square mile radius in a part of New Mexico that has been designated as an underserved area for medical and mental health treatment options, with a shortage of medical clinicians and 60% of residents living in below federal poverty. line. It is also the only primary care provider in the region.
When the partial shutdown was triggered on December 21 amid a clash between the White House and Congressional Democrats over funding for the border wall, Perdue detailed how USDA’s programs would be affected. The summary does not specifically mention the rural development program, except that the ministry would not be able to provide new loans and grants.
After the first week of the shutdown, according to Perdue’s statement, the USDA should stop processing agricultural loans and certain farm payments, including direct payments, market assistance loans, market facilitation payments and disaster relief programs.
Due to the leave, a USDA spokesperson was not available to comment on the extent of the loan funding problem for rural providers. By the deadline, it was not clear how many rural clinics and hospitals are seeing their funds cut.
But the loan program is important: In 2017, USDA invested in 97 rural health care projects covering about 2.5 million people. Loans are important. Ohio’s Avita Health System Raised $ 91 Million in 2017 to convert a vacant section of the mall into a mental health and addiction treatment hospital.
On the deadline, officials in the White House Office of Management and Budget did not respond to whether those responsible for those loans could be fired at least temporarily to make the necessary clearances.
Luján on Tuesday launched potential USDA action to approve hospital funds as a measure of fiscal prudence.
“The USDA expects the entire loan to be repaid in full and the Pecos Valley Medical Center must complete its expansion project in order to repay the federal investment,” Luján said. “It is in the best interest of the USDA to protect the federal investment they have already made in PVMC and to process the only remaining loan document required to withdraw the funding.”