‘-by Ryan Sprinkle
After additional attempts at deal-making and vote delays, House Republican leadership and the Trump administration failed last week to convince enough Republican House members to support the American Health Care Act.
With this loss, President Trump has signaled that his administration will move on to other legislative policy objectives and abandon attempts to repeal and replace the Affordable Care Act in the near term. With congressional Republicans presently lacking a clear caucus consensus on a preferred ACA policy alternative, the probability of broad, statutory-based healthcare reform remains uncertain.
More certain, though, are the Trump administration’s fiscal priorities for the 2018 fiscal year. The administration’s proposed fiscal year 2018 budget increases spending for the departments of Defense, Homeland Security, and Veterans Affairs. These funding increases are offset by spending reductions across all other federal departments and agencies.
For hospital leaders, this proposed budget would result in either the elimination of or reduction in funding for various federal financing programs, many of which increase lending options available to hospitals. For example, the administration’s proposed budget would remove the discretionary activities of the Department of Agriculture’s $95-million-dollar Rural Business and Cooperative Services program. Many rural hospitals across the country participate in the RBCS program to finance capital equipment acquisition or facility construction, often through public-private financing arrangements. One hospital executive recently told me, “You can’t find cheaper money anywhere.”
As federal sources for low-cost capital become less accessible, hospital leaders will be required to either forego strategic capital projects, self-finance, or look to other public or private financing channels. For the majority of hospitals, foregoing capital projects means flirting with disaster and self-financing is not a realistic option. Absent local government support, these hospitals will turn either to the bond market or financial institutions. While interest rates have been at historic lows, the Federal Reserve’s recent commitment to begin increasing the federal funds rate likely means that both bond and private financing will become more expensive.
If deal-making is to be the new model of governing, then the president’s proposed 2018 budget may be considered an opening offer. As the progression of the American Health Care Act demonstrated, everything is subject to negotiation. However, given the administration’s stance on limited federal spending for non-defense-related activities, hospital leaders should revisit the elements of their strategic plans that call for capital investments. Assessing currently available public and private financing sources while funds remain available and rates remain attractive may prove valuable given the emerging fiscal priorities in Washington.
Ryan Sprinkle is a consultant at Stroudwater Associates and a licensed (but recovering) attorney. He invites you to send him questions or topics related to federal and state healthcare policy to be discussed in this ongoing blog series. He can be reached via email at firstname.lastname@example.org or by phone at (770) 913-9046.
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