February - March 2016
2016 is here. And with it, an array of articles using terms such as “forecast” and “outlook.” Well, we too are prone to a little big picture analysis this time of year, as evident in the themes running through our newest edition of The Capital Issue.
In our feature, we provide a macro view of clinical risk and identify areas where providers should be diligent and proactive. In our hospital article, we present three case studies where hospitals obtained low-cost capital to improve their fiscal outlooks as well as their facilities and communities. Our senior living article summarizes the key findings of our second annual Seniors Housing and Care Survey, shedding some light into what providers are planning in the coming year. In the housing article, we detail recent legislative developments while also offering our 2016 market forecast. Finally, we introduce our new section, After the Financing, where we check in with projects a couple years after completion to shine a spotlight on the tangible results of financings with an eye towards how real peoples’ lives are improved.
If you have any questions or comments, please don’t hesitate to reach out to the authors as well as our bankers. And here’s to a great 2016!
Nick Gesue, CEO
The Capital Issue: December 2015 - January 2016
The nursing home industry has often been described as one of the most regulated industries in the country. This is not surprising, as nursing homes care for the most fragile individuals within the health care spectrum and are predominately reimbursed through government programs. The financial instability that can arise as a result of clinical and operational risk can affect refinancing efforts in various ways, which explains why risk management is a major area of focus for nursing home providers.
The last several years have been challenging for hospitals, as uncertainty regarding the Affordable Care Act (ACA) and a narrowing in operating profitability became the norm. In 2015, however, the three major credit rating agencies (CRAs) presented refreshingly optimistic reports, particularly for the larger providers, citing strong revenue growth, continued cost containment, greater clarity with respect to the ACA and industry trends (e.g., consolidation and technology) as reasons for the positive momentum.
In December of 2015, Lancaster Pollard sent an online survey to approximately 4,000 leaders at seniors housing and care facilities throughout the U.S. Over the course of two weeks, 295 respondents completed the online survey. The survey has a 95% confidence level and a confidence interval of 5.68, meaning that the differences in responses of 6 percentage points or more are statistically significant.
Take the good with the bad. As far as mantras go, that’s an appropriate one for the affordable housing industry as 2016 begins. With several years of budget shortfalls and sequestration in the rearview mirror, and a presidential election and changing interest rate environment on the road ahead, the housing industry begins the year with reasons to be thankful and reasons to be concerned.
Putting together a financing is a massive undertaking. From project conception to the final signatures at the closing table, the process is complicated and time-consuming. Those who work on the transactions and are immersed in the day-to-day details often have little time to reflect on the tangible results of a completed project. Once the closing bell rings and a deep breath is exhaled, it’s time to move on to the next financial structure.
The Fiduciary Focus