Now that spring has arrived, it seems like change abounds. The April-May edition of The Capital Issue spotlights health-care reform with a guest feature by Plante Moran associates about the impact of accountable-care organizations on hospitals and long-term-care facilities as well as with an article on how to mitigate risk from Medicare and Medicaid reimbursement cuts when financing a capital project.
Other topics include: financing a senior-living portfolio through HUD; the economic benefits of LIHTC development in a community; plus how nonprofits can guard their assets against inflation.
If you have any questions on these topics or would like us to visit in person to explain them, please don't hesitate to contact us.
Thomas R. Green, CEO
The Patient Protection and Affordable Care Act, more commonly referred to as the Affordable Care Act (ACA), has driven the recent health-care reform in this country as well as the controversy among business and government officials as to whether it will ultimately generate a positive outcome for the health-care industry. Regardless of the anticipated outcomes, all agree that its effects will be widespread.
“But in the world nothing can be said to be certain except death and taxes.”
Benjamin Franklin may need to amend his famous quotation to include the certainty of reimbursement uncertainty for health-care providers. Considering the size and scope of Medicaid and Medicare, the threat of reimbursement-rate cuts for these programs can be particularly problematic for hospitals as they seek financial stability and plan for future capital projects.
In the current credit environment, financing through the U.S. Department of Housing and Urban Development (HUD) has become a favorite of borrowers. With its low, long-term fixed rates, flexibility, nonrecourse feature and other benefits, HUD is often the best available option for a borrower seeking to refinance or finance new construction or rehabilitation of a senior living facility.
Low-income-housing tax credits (LIHTC) are arguably the most important resource for creating affordable housing in the United States today. Created by Section 42 of the Tax Reform Act of 1986, the LIHTC program gives state and local LIHTC-allocating agencies nearly $8 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation or new construction of affordable rental housing targeted to low-income households.
Many nonprofit organizations have failed to construct portfolios with sufficient inflation protection because inflation has been relatively tame over the past 20 or so years. As a result, their assets are exposed to a reduction in purchasing power over time. In order to address this risk, nonprofit organizations should consider a long-term, strategic allocation to asset classes that benefit from inflation, such as commodities, Treasury Inflation-Protected Securities (TIPS) and real estate investment trusts (REITs).