Chicago - May 28, 2009 - The Healthcare Financial Management Association (HFMA) recently gave testimony to the House Committee on Financial Services regarding recent disruptions in the municipal bond market and how they’ve impacted not-for-profit hospital access to capital. Eighty-five percent of all U.S. hospitals are not-for-profit.
Representing HFMA, Michael M. Allen, chief financial officer of Winona Health in Winona, Minnesota explained that hospitals’ need for inexpensive capital to implement electronic health records, invest in new medical technology, and modernize aging facilities requires access to an efficient tax-exempt bond market. He urged the committee not to impair the start of a market recovery. “Liquidity facility solutions that are brought to market should first and foremost be optional and the preservation of a private market for these facilities should be maintained,” said Allen. Initial pricing “…should be set carefully to avoid crowding relatively strong, long term providers of liquidity facilities out of the market.”
Allen also suggested that liquidity facility solutions be limited to existing issues to avoid a negative impact on the tax-exempt bond market.
HFMA members, Allen testified, support a federally backed municipal bond reinsurance program. He outlined the necessary criteria for the program: a three-to-five year window to give private bond insurers time to recapitalize; market equivalent rates so hospitals don’t receive an unsustainable artificial subsidy, and for outstanding debt issues only.
“The underwriting processes, collateral requirements, covenants and usage constraints of the existing FHA 242 program should be optimized to meet the current needs of the market,” said Allen. He also recommended eliminating the requirement that at least 20 percent of debt be dedicated to new construction, and asked that the collateral requirements be amended to allow “credit-worthy” hospitals to access the FHA 242 program despite recent adverse financial results.
Dick Clarke, HFMA's President and CEO, commented on the testimony, “In developing our comments, we gathered significant feedback from our members including our Large System CFO Council, National Advisory Council’s Finance and Accounting group, Principles and Practices Board, Executive Committee, and others. We are proud to be able to educate decision-makers on the intricacies and realities of maintaining fiscally healthy healthcare organizations..”
A detailed copy of HFMA recommendations on this topic can be obtained by calling the contact number provided.
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About HFMA
The Healthcare Financial Management Association (HFMA) provides the resources healthcare organizations need to achieve sound fiscal health in order to provide excellent patient care. With over 35,000 members, HFMA is the nation's leading membership organization of healthcare finance executives and leaders. We provide education, analysis, and guidance; we lead change and innovative thinking; and we create practical tools and solutions that help our members get results. Addressing capital access to improved patient care to technology advancement, HFMA is an indispensable resource on healthcare finance issues.
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