Improving Healthcare Infrastructure and Economic Growth: A Look into Residential Care Facilities and Hospitals

Explore the impact and initiatives of the Office of Healthcare Programs in providing affordable financing for healthcare facilities, reducing costs, and strengthening communities. Learn about their achievements, fiscal statistics, economic impacts, and continuous improvement efforts for quality healthcare nationwide.

• Healthcare programs
• Residential care facilities
• Hospitals
• Economic growth
• Affordable financing

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1. Welcome & Introduction Welcome & Introduction Roger Lukoff Roger Lukoff Associate Deputy Assistant Secretary, Office of Healthcare Programs (OHP) Kelly Haines Kelly Haines Director, Office of Residential Care Facilities (ORCF) Tim Gruenes Tim Gruenes Director, Asset Management & Lender Relations, Office of Residential Care Facilities (ORCF) Eastern Lenders Conference Philadelphia, PA March 13 & 14, 2013 1

2. WHO WE ARE Section 232 Residential Care Facilities and Section 242 Hospitals Healthcare principal balance of over $28.3 billion with over 2,890 loans in the FHA portfolio (as of 12/31/12) WHAT WE DO Enable more affordable financing of needed healthcare facilities Reduce cost of care and increase accessibility Allow borrowers to achieve at least an AA credit rating Improve access to quality healthcare nationwide at no cost to the taxpayer Strengthen communities - healthcare facilities are economic engines Healthcare facilities employ millions of Americans and support trillions in economic activity 2

3. Our Hallmark Continuously improving our business practices and processes, while preventing claims. Lean Processing redesign has greatly cut processing time, improved customer service, and strengthened risk analysis Net claim rates have been less than 2% in both programs The Harrison at Heritage Ft. Worth, Texas, Section 232 New Construction 3

4. Fiscal Year-End Production Statistics Section 232 Commitments Issued Initial Endorsements Applications Received COUNT $ BILLIONS COUNT $ BILLIONS FY11 FY12 714 FY11 473 FY12 783 $3.7B $6.0B 415 FY11 FY12 FY11 FY12 706 $3.3B $5.5B FY11 FY12 T 708 Section 242 Commitments Issued COUNT $ MILLIONS FY11 8 FY12 6 FY11 FY12 $398M $246M 4

5. Economic Impacts of FY12 Commitments Section 232 During Construction: 5,720 projected new jobs will be created during construction, with $643 million of overall economic benefit. Following Construction: FY12 projects will generate an estimated annual new economic activity of $316 million and 2,600 new jobs. Section 242 During Construction: 2,731 projected new jobs will be created during construction, with $695 million of overall economic benefit. Following Construction: FY12 projects will generate an estimated annual new economic activity of $1.35 billion and 8,584 new jobs. 5

6. DEMAND FOR SECTION 232 REMAINS STRONG! 6

7. WE ARE DOING OUR BEST TO KEEP PACE WITH SUBMITTALS 7

8. PRODUCTION Continues this week Roger Lewis, Director of Production 8

9. All Section 232 Loans 900 800 700 600 500 400 Applications Received Commitments Issued 300 200 100 0 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 (to 2/28/13) 9

10. Doing our best to keep pace In FY 2012, we received 714 Firm Applications and issued 783 Firm Commitments. In FY 2012, average processing time for underwriting was 50 days, and we successfully reduced application queues. FY 2013 (as of 2/28/13), we have received 460 Firm Applications and issued 372 Firm Commitments. We are a pace for .. Receipt of over 1100 Firm Applications Issuance of just short of 900 Firm Commitments 10

11. 232 Queues 232 QUEUE VOLUME as of 8/31/12 9/30/12 6 23 4 1 62 82 15 14 3 2 3 5 4 4 0 0 97 131 as of as of 10/31/12 23 0 105 14 2 5 4 2 155 as of 11/30/12 57 0 78 15 1 4 4 0 159 as of 12/31/12 67 0 72 16 1 5 2 0 163 as of 03/7/13 32 0 77 223f Regular Queue 223f Portfolio Queue 223a7 232 New Construction 232 Sub-Rehab 241a Supplemental 232 Blended Rate 232i Fire Safety 16 2 5 2 0 139 TOTAL APPLICATIONS 11

12. 223f and 223a7 Queues: Oldest 223f in the queue was submitted 2/1/13 (there are 4 projects on hold listed at top of the queue). Oldest 223a7 in queue submitted 1/31/13 We consolidated the Green and Regular 223a7 Queue. 12

13. Addressing Other Queue: Recently moved resources to underwriting Other Queue/241a projects Oldest Other Queue = submitted 4/25/12 Considering establishing a Green Lane queue for 241a projects where current NOI covers the debt service on the new loan Oldest 241a in queue = submitted 7/5/12 Rachel Coleman continuing pre-screening of Other Queue projects to better serve you. 13

14. Application Processing Times (Calendar Days) ACTUAL APPLICATION PROCESSING TIMES (AVERAGE CALENDAR DAYS) For Deals that Closed between October 2012 to January 2013 (4 months) Count In Queue In Underwriting In Closing Total Processing Type 140 days 223a7 104 28 days 41 days 71 days 165 days 223f 39 40 days 61 days 64 days 580 days Other 3 398 days 37 days 145 days TOTAL 146 39 days 46 days 71 days 156 days 14

15. Underwriting Contract Averaging 60/month assigned to contractor Contractor processed 299 applications last year Contract expiration 6/30/13: Plan to keep contract support in place 15

16. WHATS NEW? 16

17. Firm Commitment Authority FHA nearing amount allocated in Continuing Resolution OHP continuing to present projects at Loan Committee. OHP determining which Firm Commitments to fund with remaining allocation. 17

18. New Section 232 Forms (PRA) Underwriting, Asset Management, Closing Our goal is to introduce you to these in this training Final Notice Tomorrow (3/14/13) Generally, new closing documents required on projects where Firm Commitments issued on or after 4/9/13 18

19. New Section 232 Forms (Continued) Others, required for submissions on or after 120 days from Final Notice (July 12, 2013) Optional use prior to then, however, submissions must be entirely new or old documents HUD.GOV: Posted as links to new documents we are planning on organizing by program type/action type. Now posted as lump sum: www.hud.gov/232forms 19

20. Sprinkler Compliance CMS has required nursing homes to be fully sprinklered by August 13, 2013. 1999 Edition of National Fire Protection Association (NFPA) 13 Standard for the Installation of sprinkler systems. Projects and their compliance are listed at the CMS website see Slides 24 and 25 If not in compliance by this date, puts license in jeopardy therefore HUD takes very serious. Therefore . 20

21. Sprinkler Compliance, Continued Any Section 223f Firm Application on a Skilled Nursing Facility submitted to HUD on or after 5/1/2013, must be listed as fully sprinklered per the CMS website prior to HUD acceptance of the application. 21

22. Sprinkler Compliance, Continued All Section 223f Firm Applications submitted prior to 5/1/2013 (on which a Firm Commitment has not been issued prior to 3/8/13) on Skilled Nursing Facilities that are not listed as fully sprinklered per the CMS website, must: Prior to Closing: Be listed as fully sprinklered per the CMS website, or Demonstrate to HUD s satisfaction that the property is currently in compliance with the 1999 Edition of NFPA 13 Standard for the Installation of sprinkler systems. 22

23. Sprinkler Compliance, Continued On Section 223(a)(7) Firm Applications (that have not closed) on Skilled Nursing Facilities that are not listed as fully sprinklered per the CMS website, HUD will at its option: Require demonstration to HUD s satisfaction that the property is in compliance with the 1999 Edition of NFPA 13 Standard for the Installation of sprinkler systems prior to Closing, or Require demonstration to HUD s satisfaction that the property will be in compliance with the 1999 Edition of NFPA 13 Standard for the Installation of sprinkler systems by an agreed upon date after closing (prior to August 13, 2013) 23

24. Sprinkler Compliance, CMS Website http://www.medicare.gov/Download/Downloa dDB.asp Excel Spreadsheet: Column M- Sprinkler Status indicates if the facility is Fully, Partially or Not Sprinklered and Column I- Fire Survey Date indicates the date of that determination by the state surveyor. 24

25. Sprinkler Compliance, Instructions Once You Click on the CMS Website Link: From the drop down menu called Select A Database select Nursing Home Compare About The Nursing Home and the click on the Continue button Click on Download button for the CSV Flat Files option (2nd download button from the top). Click Open to open the ZIP file folder that will pop up. Within the ZIP file folder is an excel file called NHC_NH csv Click on it to open it up. 25

26. Section 232 Handbook ORCF staff is currently working on this. John Hartung will cover more on this in his 4:30 session on Thursday. 26

27. Miscellaneous Mary Walsh, who is our Lenders Relations liaison, is available to meet with you if you want to discuss feedback on lender performance. Powerpoints used for this training will be posted to HUD.GOV after the training. 27

28. Agenda Highlights 28

29. Questions 29