For years, the Lāna’i Community Health Center in Hawaii operated out of a 900-square-foot converted three-bedroom house, offering care to all comers, but with limited ability to attract physicians and provide specialty services. Today, it boasts a 6,800-square-foot facility with vastly expanded services and space to train locals for healthcare careers.
Before, families had to choose between costly trips to Oahu or Maui for mammograms and prenatal care and putting food on the table. Now, there are follow-up services for premature babies and heart attack victims, and onsite dental and vision services. The health center also offers teledermatology and telepyschiatry services to its roughly 3,000 inhabitants.
The lay of the land
Since 2010, 71 rural hospitals have closed and another 683 are at risk of closing — limiting access to care and further depressing local economies, according to the National Rural Health Association. Fueling the crisis are cuts in Medicare payments and the Affordable Care Act, which rewards hospitals that do a high-volume business. Cuts in reimbursement for bad debt have been especially hard on rural hospitals and health centers.
While federally qualified health centers have received some federal funding for capital projects in recent years, those opportunities don’t come around everyday, says Sharon Beaty, CEO of Mid-State Health Center in New Hampshire. The U.S. Department of Agriculture sometimes funds rural healthcare projects with low-interest loans or loan guarantees, but generally, obtaining funding from economic development sources is more realistic, she adds.
Off the main land
For Lāna’i and a handful of other rural health centers, the answer was the federal New Markets Tax Credit program. The NMTC was established as part of the Community Renewal Tax Act of 2000 to spur community development and economic growth through the use of tax credits that attract private investment to distressed communities.
To qualify, a project must be located in an economically distressed area where the individual poverty rate is at least 20% or where median family income doesn’t exceed 80% of the area median based on the most recent census data, explains Charles Spies, CEO of CEI Capital Management LLC (CCML), the nation’s largest allocator of NMTCs.
Lāna’i started planning its expansion in 2008, but by 2013 still lacked a third of the necessary funding. With the help of CCML, the center secured $8 million, about $2.6 million of which was equity. The center set aside $80,000 of the equity to support health education and scholarship programs within the local elementary school and high school. “We’re not only creating an alternative path for individuals that pays much better than the local hotel industry, but we’re creating a future workforce for our health center,” says Shaw.
To boost job opportunities, Lāna’i also committed to ensuring that more that 40% of its workforce were low-income at the time of hire — a goal it exceeded by 20%.
Overall, Lāna’i contributes $3 million to the local economy, $2 million of it directly, according to Shaw. She sees the NMTC as “an important mechanism to bring forth gap funding to projects,” particularly when access to private foundations and other funding opportunities are limited.
Meanwhile, in the White Mountains...
Five thousand miles away, Mid-State Health used a $3.4 million New Markets Tax Credit to find funding to build a community health center in rural Plymouth, NH. The new facility more than doubled the size of the previous one and employs more than a hundred people, 46 of them clinicians, according to Mid-State’s 2015 annual report.
The project spurred the local hospital to build a satellite facility across the street to house specialist physicians and provide rehabilitation services. Other new businesses also were drawn to the area.
The success of the Plymouth project led to a USDA Rural Economic Development loan for a similar facility in Bristol.
Mid-State CEO Sharon Beatty says rural healthcare providers can be “substantial economic drivers” in their communities, and “that should be touted and recognized” by capital investors.
Also in Plymouth, Speare Memorial Hospital used the New Markets Tax Credit program to erect a building that offers rehabilitation, internal medicine, orthopedics/sports medicine, and ophthalmology services, sparing residents a trip to Manchester 60 miles away. Triple Pundit reports. The facility also provides diagnostic testing and X-rays. Like Lāna’i and Mid-State Health, the project has been good for the local community, adding nearly 50 jobs.
Our tax credit could be your organization
CCML’s Spies says “many, many more” health centers and hospitals would likely qualify for the program if they knew about it or took the time to apply. “We have used the New Markets Tax Credit four times for hospitals or health centers to upgrade and expand in order to better service their population and are glad to review others that are considering it,” he adds.