Facility Questions, Facility Needs, Facility Dreams

(1)

Facility Questions, Facility Needs, y , y , Facility Dreams

How to Make It Happen

(2)

Why Why

• Face to the world Face to the world

– Provider of choice or last resort – Competitive or has‐been p

• Platform for delivery

– Efficient and sparkling Efficient and sparkling – Confused and run down

• Emotional signature Emotional signature

– Healing

– Reduces morale Reduces morale

(3)

Questions and concerns Questions and concerns

• Existing facility g y

– More efficient?

– More attractive?

– Sell it or leave it?

– How much will it cost?

– Is it worth it?

N f ili

• New facility

– How big?

– Where?

What kinds of space?

– What kinds of space?

– Lease vs. buy?

– How much will it cost?

– Is it worth it? Is it worth it?

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

Do you have a sustainable vision?

(18)

The Real Estate Process

Community

N d Business Plan Facilities Plan Capital Plan Implementation T

Design, Build,

Need p

Team Occupy, Deliver

(19)

Do you have a systematic process?

(20)

Manage the process

• Plan

• Investigate

• Negotiate

2016

Negotiate

• Implement

.

(21)

D CHC h th kill t d d Does your CHC have the skill sets needed

to maximize value?

(22)

Want to be a real estate maven?

• Financing options

Market

• Location

• Building

• Current deals

Market Knowledge

l l

^{• Money}• Non‐money financial termsM

• Operational terms

Real Estate Deal Making

A hi

• Architect

• General contractor

• IT

• Land use counsel

• Real estate counsel

Real Estate Team Building

• Real estate counsel

• Integrate

• Coordinate

• Motivate Di i li

Project

Leadership

• Discipline

Leadership

(23)

Go‐It‐Alone communications Flow

Architect

General

All communications directed at CEO.

Communications between consultants

CHC

General Contractor Furniture

Consultant

between consultants may be episodic.

Potential for silos, dropped balls.

CHC

CEO

IT Advisor

Real Estate Lawyer

Land Use Counsel Real Estate

Broker

(24)

Leadership time for select projects

Project Type

Negotiated market‐

rate lease renewal

Search for space to lease;

lease,

Renovation of existing facility (15,000 sq.

New facility, ground‐up construction build‐

out

ft)

Duration (weeks)

52 135 26 144

Hours /project leadership

288 402 310 1470

Increase in 5 5 3 11 9 10 2

Increase in hrs/wk for CHC

leadership

5.5 3 11.9 10.2

Increase in .7 .4 1.5 1.3

days/wk for CHC

leadership

(25)

Additional days/week for the practice leader

Sun.

Extra time

Fri.

Sat. time

Wed.

Thurs.

Normal work day

Mon.

Tues.

Negotiated lease renewal Search for new space Renovation, existing facility New construction

(26)

HCREA structured project communications flows

HCREA qualifies consultants

CHC CEO

HCREA qualifies consultants, assembles team, structures tasks, leads communication, drives action.

Communication among team members is regular frequent

Owner’s Rep

members is regular, frequent, transparent. HCREA provides concise reports to CHC leadership.

Owner s Rep

Architect General

Contractor Broker Furniture

consultant/broker

Financial

Consultant Real estate lawyer

(27)

How can you use time as an ally?

(28)

Critical project phases are sacrificed when projects are fast‐tracked

when projects are fast tracked

36 month h d l

roject

Strategy

Programming 24 month

schedule schedule

Manage Pr Programming

Site Searches

Financial negotiations Financial analysis

The time needed for tenant work cannot cost- effectively be shortened so

12 month 18 month schedule

Allowed to Financial negotiations

Financial analysis Financial negotiations Lease negotiations

shortened, so tenants who fail to allow adequate time, sacrifice the time needed for site searches, financial

negotiations and Deal negotiations

0 20 40 60 80

12 month schedule

Time A Lease negotiations

Architectural Designs Build-out

Move-in

g

lease negotiations Deal negotiations

Bi-Week Periods from Project Inception to Move-in

(29)

Manage the process for maximum results

Define your needs; create a sustainable plan

Create

sustainable plan

Get the help you need Real estate expertise

Plan

p Project leader

Follow a systematic process Transparency

Define

p y

Communication

Manage expectations Goals in view

Controls

Use time as an ally

(30)

(31)

PRIMARY CARE DEVELOPMENT CORPORATION

(32)

PCDC

• Founded in 1993

• A not-for-profit Community Development Financial Institution (CDFI)

• A singular mission: to expand and transform primary care in underserved communities in order to:

₋ improve health outcomes

₋ lower health costs

₋ reduce disparities

(33)

PCDC

• Mission is executed through 3 programs:

₋ Capital Investment: Expansion

₋ Performance Improvement: Transformation

₋ Policy/Advocacy: Promotion

• Key Accomplishments:

₋ $650 million invested in 100+ primary care

₋ projects serving 900,000 individuals

₋ 850,000 square feet improved

₋ 7,000 healthcare workers trained

₋ 900 healthcare organizations strengthened

₋ 4,600 jobs created/retained in low-income communities

(34)

Health Care Reform and Health Centers

Pre-reform Reform

Pay for volume Pay for Performance or value Care in hospitals Care in communities

MDs solo Care Teams

Care in Silos Collaboration across settings

Limited data Expect managing populations with data

Targeted disease specific Proactive and systematic patient education

patient education

(35)

VBP Reimbursement Continuum

(36)

Payment Reform

• Traditional Revenue Model: Some mix of…

• Fee for Service

• Capitation

• Compensated Care (330 grants, etc.)

• Payment Reform:

• DSRIP projects in 7-8 states

• State/Payer incentive payments

• Key performance metrics:

• Reduced hospital (re-)admissions

• Improved health outcomes

• Conclusion:

• Revenue tied to Performance

• Outcome measurement essential

• Data Capacity / Usage

(37)

Recent CHC Projects

• Expansion

• New Sites

• New Services

• New Geographies (x-border)

• Service Replacement

• Integration

• Medical, Dental, Family, etc.

• Behavioral Health

• Supplemental Services (Ex. Radiology, Podiatry, Optometry, P/T, etc.)

• Non-building Projects

• Mobile Vans

• Tele-health

• EHR Implementation and Reconfiguration

(38)

Recent Financing Methods

• Bridge Loans

• Receivables (grants, fundraising)

• Operations

• Short-term Loans

• Pre-development

• Site acquisition

• Construction

• Equipment / Vans

• Long–term Loans

• Leasehold Improvements

• Permanent Financing

• Business Acquisition

• Redevelopment

• Expansion

• New Markets Tax Credits

(39)

Debt might be ok in theory, but…

• “We didn’t complete the project because the grant was insufficient.”

• “Unlike other FQHCs, we don’t like debt”

• “We wouldn’t qualify for a loan”

• “We’ve never been profitable”

(40)

DEBT: POSITIVE CONSIDERATIONS

• Catalyst for Project Advancement:

• Quick: Advances your project within weeks

• Attracts funds from other sources

• Mitigates cash flow lags from other funders

• Preserves cash on hand

(41)

New Markets Tax Credits

Pros:

⁺ Can source 20-25%+ of project budget

⁺ Favorable blended interest rate (typically <3%)

⁺ More flexible LTV and DSCR

⁺ Can leverage grants and cash reserves

⁺ Debt forgiveness potential

Cons:

₋ Project must be in qualified area or benefit targeted population

₋ Competitive: Ready to go!

₋ High upfront costs due to complexity

₋ Best suited to $5+ million projects

₋ 7 year term non-cancellable

₋ Complex!

(42)

Thank you for attending

Anne Dyjak

Managing Director, Capital Investments

Primary Care Development Corporation

212-437-3920 [email protected]

www.pcdc.org

(43)

Nonprofit Finance Fund

^®

Presented by:

Brenda Loya, Senior Investment Officer, Financial Services October 18, 2015

Introduction to NFF: Responding to Community Health Needs Across

Communities

(44)

Overview:

Nonprofit Finance Fund

^®

(NFF)

NFF, a nonprofit 501(c)(3), mission is to unlock the potential of mission-driven organizations through tailored investments,

strategic advice, and accessible insights.

 Founded in 1980: 35 year track record of providing capital and expertise.

 Over $575MM in financing, $115MM in re- grants and $1.5 billion in leveraged capital

 1000+ customized financial consultations

 Hundreds of partnerships and publications advancing financial awareness and friendlier funding practices for nonprofits

 Serving the nation from offices on the east and west coast

NFF:

“…arguably the most influential voice in the

ongoing effort to reshape thinking and practice about nonprofit

capitalization.”

-The Nonprofit Times

(45)

What We Do and Who We Serve

(46)

Tailored Investments

 NFF’s tailored investments are designed to meet the needs of mission- driven organizations that provide vital goods and services that improve peoples’ lives. NFF delivers:

 Facility Finance:

– Acquisition/Redevelopment or New Construction – Leasehold Financing

– NMTC Leverage Lending

 Growth Capital: Critical and flexible capital for growth and change

– Investment in infrastructure

– Equipment (Medical, Electronic Health Records) – Staff and/or capacity expansion

 Bridge Loans: Bridging capital grants, foundation grants, etc

 Lines of Credit: Seasonal cash flow needs due to reimbursement delays

(47)

NFF’s work in Community Health

NFF offers a full spectrum of financing and consulting services to Federally Qualified Health Centers (FQHCs) and other community health providers nationwide, providing resource to support

expansion and operations.

 $50 million in direct lending

 $80 million in New Markets Tax Credit (NMTC) for health care

 $300 million leveraged for health project through collaborative financing

 Example New York FQHC Transactions

 Urban Health Plan (Facility Financing/NMTC)

 Callen-Lorde Community Health Center (Facility Finance, Line of Credit)

 Betances Community Health Center (Growth Capital)

 Housing Works (Growth Capital/Line of Credit)

(48)

Learn More nonprofitfinancefund.org Twitter twitter.com/nff_news

Facebook facebook.com/nonprofitfinancefund

Our Blog philanthropy.com/blogs/money-and-mission Sign Up nonprofitfinancefund.org/sign-up

RSS nonprofitfinancefund.org/news/feed Get in

Touch! Brenda Loya, Senior Investment Officer [email protected]

212-457-4717

nonprofitfinancefund.org 5

(49)

1

1 Investing in Care that Works

Flexible Financing for Healthcare Providers and Plans Serving Low-Income Communities

Al Shehadi, Chief Lending Officer [email protected]

(50)

2

V-Cap Mission

• V-Cap finances high-performing healthcare organizations for which access to capital is a potential barrier

• V-Cap’s lending supports models of care that

demonstrate cost savings and improved health outcomes

• V-Cap prioritizes:

• Integrated, person-centered care for high-needs

communities

• Care models that create and enhance front-line

healthcare jobs

Vital Healthcare Capital (V-Cap)

Capital For A Changing Healthcare System

• New non-profit loan fund financing quality healthcare and good healthcare jobs in low- income communities.

• Lends to innovative healthcare organizations developing or expanding models of integrated care that advance population health.

• Board includes national leaders in healthcare, finance and community development. Senior staff has deep healthcare and finance experience.

• Loan fund initially capitalized at $30 million.

• Provides facility, bridge and business financing for healthcare providers and plans.

• Lends to healthcare organizations across the continuum of care.

Investing in Care that Works

2

(51)

3

It’s no longer just about facilities…

Financing Delivery System Change

Fragmented Integrated

Care Healthcare Delivery System Change

Key Initiatives Include:

• Patient-centered care (PCMH)

• Coordinated care for high-needs populations

• Integration of behavioral & physical health care

• Supportive services that improve health status

• Reducing avoidable hospital admits/readmits

• Value-based payments & shared savings

Integrated Care Happens Across Sectors

• FQHCs

• Behavioral health providers

• Substance abuse/addiction services

• Home health care

• Long-term & subacute care

• Managed care plans

• ACOs/IPAs/DSRIP PPS

(52)

4

Example: Facility Loan

Key Project Features

• Use: New clinic to serve the medical, behavioral

& social service needs of low-income children with developmental disabilities

• Details: 10,000 sf build-out of leased space in former county hospital

• Borrower: Lead FQHC with strong management team and financial track record

• Partners: Collaborative effort of 14 FQHCs and multiple social service providers

• Innovation: FQHC-driven collaboration of

multiple providers to address complex needs of children with special needs in a single medical

“home”

• Timing: early 2016

Loan Summary

Amount $2,000,000

Rate TBD

Term 7 years

Repayment 12 months I-only 6 year amortization

Collateral

Leasehold mortgage 2^nd lien on another property Other Funds $1,800,000

TDC $3,800,000

(53)

5

Example: Business Loan

Key Project Features

• Use: Acquisition of privately-owned primary care practice

• Details: Existing 28,0000 sf clinic in leased space with minimal tenant improvements required

• Borrower: FQHC with strong management team looking to grow

• Partners: Financing provided by two healthcare CDFIs (non-profit lenders)

• Innovation: Acquisition of established clinic offers opportunity for substantial growth;

adding dental & behavioral services; expanding population served from adults to family

practice

• Timing: late 2015

Loan Summary

Amount $3,700,000

Rate 6%

Term 7 years

Repayment

12 months I-only 6 year P&I Balance at maturity

Collateral

Leasehold mortgage Pledge of A/R 2^nd lien on another property Other Funds $1,565,000

TDC $5,265,000

(54)

6

Example: Bridge Loan

Key Project Features

• Use: To bridge a portion of shared-savings payment due from managed care plan to FQHC

• Details: Bridge 50-75% of shared savings earned by FQHC but not yet payable

• Borrower: One of several FQHCs

• Partners: To be structured in collaboration with managed care plan, which validates amount and timing of shared-savings payment due

• Innovation: Extends shared-savings

partnership between plan and provider to allow provider to immediately reinvest payments due in further shared-savings initiatives

• Timing: 2016

Loan Summary

Amount Up to $1,500,000

Rate TBD

Term Up to 18 moths

Repayment

I-only during term;

balance due upon receipt of shared- savings payment

Collateral

Assignment of shared- savings payment;

other collateral as needed

Other Funds n/a

TDC n/a

(55)

7

V-Cap’s Loan Products

Loan Type Facility Loans Bridge Loans Business Loans

Loan Use

Acquire, expand or rehabilitate facilities improve services &

access to care and/or reduce the cost of care

Bridge grant funds, other capital sources or specific receivables to provide greater flexibility and speed in initiating new programs

or systems

Capital to allow innovative organizations to take advantage

of opportunities to expand

Maximum

Loan $5 million $5 million $5 million

Loan Term Up to 7 years Up to 3 years Up to 7 years

LTV ^{80% LTV} 80% LTV in most cases 80% LTV in most cases

DSCR ^1.25x ^1.30x ^1.30x

Collateral Fee or leasehold mortgage

Collateral assignment of take-out source;

other collateral as needed

Based on loan use (e.g.

equipment mortgage, collateral assignment of receivables)

(56)

8

Al Shehadi

Chief Lending Officer Vital Healthcare Capital

254 West 31

^st

Street, 7

^th