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Bill keeps FHA's Sec. 242

July 26, 2013

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The House Financial Services Committee on July 24 passed legislation to establish new standards for the Federal Housing Administration’s (FHA) hospital mortgage insurance program known as Section 242 – a program that has long provided an important financing tool for many hospitals. A draft of the legislation had proposed eliminating the program.

The “Protecting American Taxpayers and Homeowners Act” or “PATH Act,” would require the Housing and Urban Development (HUD) secretary to set standards and limits for the program related to the percentage of coverage provided to entities that lack “access to credit where accessing such credit would allow the hospital to service low and moderate income populations,” and the percentage of program commitment authority “concentrated in hospitals owned by a single entity or person.” The bill also would require FHA to study the impact of geographic concentration in the program.

In a letter last week, the AHA had urged committee leaders to reject a provision in draft legislation proposed by committee Chairman Jeb Hensarling, R-TX, that would have repealed the program.

“At a time when hospital revenues are already strained, hospitals must respond to rapidly changing market and government forces, including: reimbursement reductions and changes; an increasing necessity to provide access to a broad range of health services to a growing population; and limited access to capital,” wrote AHA Executive Vice President Rick Pollack. “These market forces are driving an urgent need for hospitals to make significant capital investments while reducing costs, both of which require continued access to lowcost capital through the hospital mortgage insurance program.”

Enacted in 1968, the Section 242 program helps hospitals modernize, expand and equip themselves with the latest technology, and assists communities in replacing obsolete hospitals or in building them where none existed before. Many hospitals find that FHA-insured financing is the only way they can obtain viable and affordable funding for a new building project. Since the inception of the program, 8% of hospitals nationwide have received FHA-insured financing. The program has issued more than 400 insurance commitments totaling $15.6 billion for hospital projects in 43 states and Puerto Rico.

For more on the AHA’s July 17 letter, click here:
http://tinyurl.com/mfhlbga.