Authorizes the commissioner of health to establish a program to provide loans, through the dormitory authority, to hospitals to finance health care reform projects

Summary of provisions

Section one adds a new subdivision (17) to Public Health Law (PHL) 2801-a. This subdivision authorizes the Commissioner of Health to create the program and specifies that it applies only to hospitals in underserved regions and only to hospitals unable to obtain loans from conventional lenders. Applicants to the program must commit in writing to use the funds for health reform projects such as downsizing, expansion of primary care, and creation of care coordination infrastructure. This binding commitment requires the hospital to attain defined health reform metrics, such as specific numbers of increased primary care visits, specific reductions in the number of inpatient admissions, etc. The credit enhancement program shall be administered by the Dormitory Authority, or a not-for-profit designated by the Dormitory Authority. This section also authorizes an optional debt service reserve fund to pre-fund potential obligations in the event of a default. In the event of a hospital default, funds would be drawn from health reform funding made available to New York by the federal government under the proposed Section 1115 waiver funds, other ACA health reform funds provided to N.Y, or other allocated funds. This paragraph clarifies that under no circumstances are the potential State payments to be considered a general obligation of the State.

Sections two and three amend Public Authorities Law § 1676(b)(2) and 1680(1), respectively, to include hospitals and affiliates as are approved for the credit enhancement program pursuant to PHL 2801-a(17).

Justification

This proposal facilitates access to capital to support these reform initiatives. It includes capital financing to providers located in high need regions and who serve patient populations with large government payer populations and payer mixes, that have chronic financial challenges and consequently unsuccessful in accessing capital to undertake reform initiatives. Those vital initiatives include restructuring, recapitalization and regional rightsizing. The credit enhancement is designed to improve the creditworthiness of the applicant hospitals sufficiently so that a conventional lender would be willing to lend to the hospital. Further, it would allow hospitals to finance capital investments at a lower cost, therefore providing added savings for the New York health care system.

The program would only apply to hospitals that operate in underserved regions and meet defined criteria to advance the health reform agenda. The program would be administered by the Dormitory Authority or a designated not-for-profit. Applicants must receive approval from a committee chaired by the Commissioner of Health, consisting of the CEO of the Dormitory Authority and a small number of representatives from the Medicaid Redesign Team. Applicants would need to commit that the uses of the credit-enhanced loans would promote agreed-upon regional health reform objectives. Applicants would submit a comprehensive program and business plan and be required to execute documents containing health reform covenants and metrics.

Funding under the program would be for the full spectrum of capital needs including facility renovations and repurposing, medical high tech equipment and health information technology, "soft" costs, working capital, and care management infrastructure development. Uses of the loan funds could extend outside the hospital to its affiliates.

The bill authorizes creation of an optional debt service reserve fund to be drawn upon in the event of a default. In the event of a default by a borrower on any portion of its annual debt service, the state would pay the amount of the default to the lenders through 1115 waiver funds allocated for this purpose, other federal health reform funds made available to the state or other allocated funds. The bill contains explicit provisions assuring that the potential payments by the state are not a general obligation of the state and thus the state's full faith and credit is not pledged to this credit enhancement

Legislative history

New bill.

Fiscal implications

The State obligation to pay any funds is contingent upon a hospital's default in repayment to a lender, which may never occur. In the event a default did occur, payments by the State would be made to the lender solely from allocated funds from the 1115 waiver or other federal health reform funds, or other allocated funds.

Effective date

Immediately