beyond bandaids: the need to rebuild new york's health centers

8/14/2019 Beyond Bandaids: The Need to Rebuild New York's Health Centers

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Beyond Bandaids

The Need to Rebuild

New Yorks Community Health Centers

Results from the 2001 Capital Needs Survey

Prepared By:Primary Care Development Corporation

In Collaboration With:Community Health Care Association of New York State

April 2001


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PRIMARY CARE DEVELOPMENT CORPORATION

PCDC was established to preserve and expand critically needed primary care servicesin underserved communities in New York City. Since 1994, it has provided financialand technical assistance to health care providers to enable them to enhance theirfacilities and improve their operations. Through its unique financing mechanisms,which leverage public and private grants and loans, PCDC has financed 28 primarycare centers to date, representing a total investment of $100 million.

COMMUNITY HEALTH CARE ASSOCIATION OF NEW YORK STATE

CHCANYS is a 30-year old primary care trade association that represents more than

100 Community Health Centers and affiliated organizations across the State providingprimary care to some 1.5 million New Yorkers. CHCANYS provides technicalworkshops, education and training services, and advocacy at both the State andnational levels on behalf of its members. CHCANYS also undertakes promotional,public relations, and media work that benefits its members.

2001 Primary Care Development Corporation. All Rights Reserved.

Primary Care Development Corporation

291 Broadway, 17th FloorNew York, New York 10007

Telephone: 212-693-1850Fax: 212-693-1860Web: www.pcdcnyc.org

Cover design by: DGMC Marketing Communications, Inc.


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Beyond BandaidsThe Need to Rebuild New Yorks Community Health Centers

TABLE OF CONTENTS

ACKNOWLEDGEMENTS............................................................................ii

I. EXECUTIVE SUMMARY ......................................................................1

II. INTRODUCTION...................................................................................2

III. FINDINGS.............................................................................................6

A. Capital Need Overview..................................................................6

B. Main Sites & Satellites ..................................................................9

C. Geographic Distribution .............................................................11

D. Age of Facilities...........................................................................12

E. Capital Priorities ..........................................................................15

F. Funding Sources..........................................................................17

IV. FINANCIAL CONDITION ...................................................................18

V. TOWARD A SOLUTION .....................................................................20

APPENDICES

APPENDIX A SURVEY QUESTIONNAIRE

APPENDIX B SURVEY RESPONDENTS


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ACKNOWLEDGEMENTS

The Primary Care Development Corporation (PCDC) and the Community Health Care

Association of New York State (CHCANYS) thank all who participated in thepreparation, distribution, and analysis of the capital needs survey. We would especiallylike to thank the health centers, not only for responding to the survey, but also fortaking the time to provide us with a clearer picture of their needs and the obstaclesthey face in trying to access capital.

We would also like to thank The Osborne Group and the United Hospital Fund (UHF).The Osborne Group was retained by PCDC to collect and wade through the data tocreate a thorough and consistent database. They also assisted in analyzing, testingand compiling the results, and wrote portions of this report. UHF compiled andanalyzed information on the financial condition of Community Health Centers, and this

report incorporates relevant findings from UHFs work.

Thanks are also due to the staff members of and advisors to PCDC and CHCANYS for

their invaluable insight and support.


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I. EXECUTIVE SUMMARY

New Yorkers in underserved communities throughout the State depend on Community

Health Centers for primary and preventive health care. The role of these centers growsmore important as Medicaid managed care, Child Health Plus and Families HealthPlus are implemented.

Many Community Health Centers face serious capital needs. To assess the extent ofthat need, PCDC and CHCANYS surveyed 40 Community Health Centers throughoutthe State concerning the state of their facilities. The 40 entities reported on 114 healthcenter sites providing 2.8 million patient visits per year.

The principal findings from the capital needs survey are:

1. Two-thirds (65%) of the health center organizations provide services infacilities with critical capital needs.

2. These centers are urban and rural and located throughout NewYork State,including New York City, Buffalo, Rochester, Syracuse, Utica, the CapitalRegion, the Hudson River Valley, Westchester and the Adirondacks.

3. Larger sites, serving the most patients, tend to be in the worst condition.

4. These health centers are typically overcrowded, often operating inretrofitted, inefficient space in need of modernization. Many face issues of

compliance with current codes governing handicapped access, fire safetyand patient privacy.

5. Health centers Statewide capital needs total $90 million.

An analysis undertaken by the United Hospital Fund has documented a volatility in thefinancial condition of Community Health Centers that impairs their access toconventional loans in amounts that could pay for the needed level of capitalimprovements. Based on the level of need and the centers financial status, PCDC andCHCANYS have proposed that:

The State should establish a Community Health Center Capital Program,funded with a $25 million appropriation, and requiring a dollar-for-dollarmatch from other sources.

This measure offers a reasonable, achievable and substantial step toward creating amodern, efficient and effective Community Health Center infrastructure. With therequired match, the State appropriation will be leveraged to meet $50 million or moreof the demonstrated need. To sustain and upgrade this vital link in the primary andmanaged care delivery system, this investment is a wise one and is needed now.



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II. INTRODUCTION

New Yorks Reliance on Community Health Centers

Community Health Centers play a major role in providing quality health care toresidents of New Yorks low-income and medically underserved populations. They area particularly important source of preventive and primary care for Medicaid, uninsuredand under-insured populations.

Though located in diverse communities, health center patients across the State sharemany characteristics. They are predominantly young, with a large portion beingmothers and children. They are predominantly poor. Many are on Medicaid, butincreasingly they are working families without insurance. Almost universally, theirhealth problems are worse than the general population.

Urban and rural communities throughout New York State have fully endorsed theCommunity Health Center concept, leading to the creation of dozens of facilities. Manyof these health centers were constructed 25 to 30 years ago. Since then many havebecome antiquated, overcrowded or both.

Although Community Health Centers have long provided essential services, they havegained added prominence in recent years as a vital component of the States strategyto improve health care access and continuity while containing costs via managed care.Health centers are well suited to this role. They provide a comprehensive array ofservices, and they enable patients to surmount barriers that often shut them out fromother providers, such as inability to pay, geographic isolation, cultural and linguistic

differences, and immigration status.

In addition to the care they provide, Community Health Centers are a significant forcefor local economic development. Recruiting from their local communities, New YorksCommunity Health Centers have created more than 20,000 jobs with a collectivepayroll of $250 million. They also strengthen and anchor communities physicalinfrastructure.

Need for Renewed Investment in Health Center Facilities

As New York moves forward in implementing managed care programs for Medicaid,Child Health Plus and Family Health Plus enrollees, preserving and strengthening allsectors of the States primary care delivery system is crucial.

Community Health Centers, which are organized in New York as Article 28 not-for-profitcorporations, generally lack access to the conventional capital markets that couldprovide a source of financing for facility improvements. This lack of access


Community Health Care Association of New York State, 1997.


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to capital results from the health centers narrow budgetary margins and lack offinancial reserves, which are a direct result of their commitment to treating patientsregardless of insurance status or ability to pay for services.

This combination of aging facilities and limited access to conventional financingsuggests that Community Health Centers face an ever-growing need to modernize andupgrade their facilities, with little means of accomplishing the task.

PCDC was created to address this very need, and its programs have resulted in $100million in investment in 28 health centers in New York City since 1994. PCDC doesnot, however, operate outside New York City, nor is there a PCDC-equivalent for therest of the State. In addition, PCDC has found that its programs cannot reach some ofthe Citys largest, and therefore most important, freestanding health centers. Asdescribed further in this report, that is due to the magnitude of these centers capitalneeds and to the volatility of their current financial situation, which makes even PCDCslow-cost financing inaccessible for the foreseeable future.

Survey Purpose

To determine the extent of the capital needs of the States Community Health Centers,and to help form a basis for addressing that need, PCDC, in conjunction with theCHCANYS, distributed a capital needs survey to all federally-designatedcomprehensive Community Health Centers in New York State, as well as to thoseCHCANYS member organizations that provide similar services to a similar clientele,but lack the federal designation. The survey was specifically designed to assess:

s The age and condition of existing medical facilities; and

s The current capital needs of health centers, whether for modernization,expansion, equipment or other needs.

The Osborne Group, a consulting firm with extensive experience working withCommunity Health Centers, was retained to collect and analyze the responsesreceived.

Beyond BandaidsThe Need to Rebuild NewYorks Community Health Centers

Federally Qualified Health Centers (FQHCs) and FQHC look-alikes. FQHCs are those health centersthat receive federal funds to help offset the cost of medical services provided to the uninsured. Look-alikes are health centers that do not receive these federal funds, but are formally recognized by thePublic Health Service as providing similar services to a similar clientele.


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Survey Process

PCDC distributed the survey questionnaire in the Fall of 2000. It was based primarilyon models used in recent years in several different states to assess capital needs of

the community health sector. PCDC and the Osborne Group collected responses intoJanuary of 2001. The Osborne Group collated and analyzed the information, andfollowed up with respondents for clarification and to ensure consistency.

Respondents

The response rate was excellent. Forty health center organizations responded to thequestionnaire, including virtually all major Community Health Centers in New YorkState. Respondents include 84% (36 of 43) of the federally-designated CommunityHealth Centers in the State, and four additional full-service Community Health Centers.

The geographic distribution of the respondents is shown in the map below.


See Appendix A, the Survey Questionnaire


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The 40 respondents provided data for a total of 114 sites that accommodate 2.8 millionbillable patient visits per year. Represented are large, small, urban, and rural centerslocated throughout the State.

Eighteen respondents are located in New York City (denoted in the report asDownstate) and 22 are located throughout the rest of the State (denoted asUpstate). There are no Community Health Centers on Long Island. Patient visitsare evenly divided between the Upstate and Downstate respondents.



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III. FINDINGS

The principal findings of the survey regarding the extent of health centers capital

needs Statewide are included in the first subsection (Capital Need Overview, below) ofthis Findings section. The subsections that follow include additional information andfindings that provide a more complete picture of the status of Community HealthCenters. Those subsections are:

s Main Sites & Satellitess Geographic Distributions Age of Facilitiess Capital Prioritiess Funding Sources

Please note that information in this report is typically presented using eitherCommunity Health Center entitiesor individual sitesas the basis of analysis. An entitymay operate one or more sites. Although this distinction can be confusing at times, itis important given the vast variation in the size and significance of individual sites with some providing as few as 1,000 patient visits annually, while others provide over150,000 patient visits.

A. Capital Need Overview

1. Two-thirds (65%) of the health center organizations provide services infacilities with critical capital needs.

Twenty-six of the 40 respondents (65%) provide services in facilities with critical capitalrequirements. These 26 include 20 entities (50%) reporting facilities in poor conditionand an overlapping 21 entities reporting an urgent need for physical expansion at oneor more sites.

During follow-up conversations, respondents indicated that their needs were typicallydriven by such priorities as:

s Modernizing facilities that have become outmoded due to age or were neverproperly configured for primary care delivery;

s Achieving and maintaining compliance with current code standards forhandicapped accessibility, fire safety, patient privacy and other matters; and

s Relieving facility overcrowding.



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A few examples illustrate the critical facility improvement needs of the respondents:

a. A Downstate health center provides services out of a 1950s-era HealthDepartment station, the design of which anticipated neither the kind nor thevolume of care being provided at the health center today. The three-storystructure has never been substantially renovated, has no elevator and hasbecome extremely constricted as patient volume has grown and neededservices have been shoehorned into all available space. In an atmospherereminiscent of a discount warehouse, patients are greeted by corridors linedwith old lockers, storage boxes and file cabinets.

b. An Upstate rural health center, providing 45,000 patient visits annually in a 26-year old facility, has been forced by patient demand to convert its physicianoffices into exam rooms and to add a trailer for administrative uses. The facilityis not handicapped-accessible and has no sprinkler system. The health centermust make a $1.6 million capital investment to meet the growing servicedemand and to remedy both patient and staff safety concerns for which it hasbeen cited by the New York State Department of Health.

c. A Downstate health center operates out of a two-story windowless formerfactory building that has not been substantially renovated since the center tookoccupancy in 1967. It has a deteriorated and visually unappealing faade, noelevator, and, although the center handles 30,000 visits annually, portions of thefacility have been placed off-limits to patients.

2. Facilities in poor condition tend to be the main, larger sites serving themost patients.

The 114 sites operated by the 40 respondents fall into two categories main sites andsatellites based on the volume of care delivered at each site. The main sites in thesurvey each average 44,600 patient visits per year, whereas the satellite sites averageonly 7,800 visits each.

Main sites are far more likely than satellites to be in poor condition. 85% of the healthcenter entities (17 of 20) reporting that they operate facilities in unacceptable or barelyacceptable condition have a main site in such condition. An example illustrates thissituation:

An Upstate health center organization provides 170,000 patient visits annually atfour sites, including 140,000 at its main site. The 66,000 square foot main site ishoused in a building that was not constructed as a medical facility. Sinceoccupying the building 22 years ago, the center has undertaken modest,piecemeal renovations to accommodate service additions and patient volumeincreases. Since it has never had the funds for a complete overhaul, the center is



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now quite inadequate. The layout is extremely inefficient, facilities and equipmentare outdated, and treatment space is insufficient to meet the still-growing demand.To continue providing care to the uninsured, the center must also maintain asatisfied base of paying patients. The centers unattractive and dated main facilitytherefore jeopardizes its viability.

The differentiations between main sites and satellites are examined below in moredetail (see subsection IIIB, Main Sites & Satellites).

3. Health centers capital needs total $90 million Statewide.

The aggregate cost of capital needs identified by the survey i.e., renovating,expanding and equipping facilities is estimated at $90 million. This figure appearsreasonable, if not conservative, based on tests using industry standards (discussedfurther in Section IIIE, Capital Priorities).



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B. Main Sites & Satellites

Health centers vary greatly in size, measured both by patient volume and by thephysical size of facilities. The largest centers handle more than 150,000 patient

appointments (visits) annually in centers of some 50,000 square feet, while thesmallest are single-doctor practices in sites of 1,000 square feet or less.

Categorizing facilities into main sites and satellites presents a clearer picture of thehealth centers. The 40 respondents to the survey provided data for a total of 114 sites.Using visit volume as the major criterion, PCDC found 54 main sites and 60 satellites.

As shown in the table below, the differences between the main sites and the satellitesare quite pronounced:

The differences in the physical condition of the main sites and satellites are particularlysignificant, and can be seen in several different ways. As shown in the chart above,

46% of all main sites exhibit high capital needs (either due to poor physical condition orsignificant overcrowding) compared with 13% of all satellites. As discussed above inthe Capital Need Overview, when looking just at those facilities in unacceptable orbarely acceptable condition, 17 of 20 entities reporting facilities in such conditionreported so for a main site.

While the data above would suggest that an average health center consists of onemain site and one or two satellite sites, health center organizations actually exhibitthree different patterns of facility configuration:

s Single-Site entities which operate only one center;

s Hub & Spoke Networks which have one main or hub site as well as one ormore substantially smaller sites. The hub provides the bulk of the entitysservices and tends to be the locus of the organizations administrative, socialand specialty services; and


This average excludes five sites with no visit volume data.


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s Balanced Networks which lack a single dominant center, and have eithermultiple larger sites and multiple smaller sites or a series of similarly-sizedcenters.

The survey respondents fall into these configurations as follows:

Health centers in each configuration pattern exhibit significant capital needs:

s 63% of health centers operating at a single site (10 of 16) report critical capitalneeds in that facility.

s 54% of Hub & Spoke Networks (seven of 13 networks) report at least one centerwith critical capital needs, including five main sites. Hub & Spoke Networks,which range from two sites (one main, one satellite) to ten sites, exhibit anaverage of three sites (one main and two satellites).

s 82% of Balanced Networks (nine of 11) have at least one center with criticalcapital needs. Eight of the networks report a main site with critical needs,including two networks with two main sites having critical needs. The BalancedNetworks range from two sites to twelve sites, with an average of six sites,including 2-3 main sites and 3-4 smaller sites.


This figure excludes eight federally-designated sites operated by these health center entities but forwhich surveys were not completed.


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C. Geographic Distribution

Health centers are evenly distributed between Upstate and Downstate regions, with anearly equal visit volume reported in the survey (see table below). The wide

geographic distribution of the centers can be seen on the map on page 3.

Upstate and Downstate centers are similar in many respects, including:

s Size Both have a similarly wide array of sizes, with main sites providing asmany as 150,000 visits and satellite centers as few as 1,000 visits. The medianvisit volume is also similar, with an Upstate figure of 14,000 versus a medianvolume of 14,800 visits Downstate.

s Configuration Both have a similar distribution of Single Site, Hub & Spoke andBalanced Network entities.

s Capital Needs Upstate and Downstate entities exhibit equally compellingneeds. Fourteen Upstate organizations reported facilities with high capitalneeds (12 main sites), and 12 Downstate organizations reported suchconditions (13 main sites).



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D. Age of Facilities

The typical center has occupied its main site for 20-plus years and its satellites for fiveyears or less. Beyond that finding, additional information on the age of facilities turned

out to be inconclusive.

In the original design of the survey, age was intended as a rough proxy for physicalcondition. The survey attempted to measure age in three different ways:

s Site tenure, i.e. the number of years an entity has occupied its site(s);

s The age of the buildings, since original date of construction; and

s The number of years since the clinical facilities had last undergone a majorrenovation.

Site Tenure Site tenure is sharply differentiated between main sites and satellites.Whereas tenure at main sites, as shown in the chart below, is typically in excess of 20years, fully half of the satellites have been in place for five years or less. Clearly manyCommunity Health Centers have occupied and operated out of one main site for manyyears before beginning to establish satellites. In addition, this length of tenuredifferential is consistent with the far greater incidence of high capital needs found atmain sites.

Although far from ideal or conclusive, years at the site is probably the best availablemeasure of facility age. It is a figure that is typically not subject to interpretation, and isalso generally known by the current management.



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renovated at any point in time. In fact a 100-year old building houses one of thenewest health centers in the State. It was fully renovated via the PCDC programand opened as a state of the art facility in 1998.

s Years Since Last Renovation Survey responses exhibited many definitions of amajor renovation, indicating a flaw in framing the survey question. Theintended definition was a renovation to create modern, up-to-date medicalspace. One facility, known by PCDC to be essentially untouched for nearly 50years, reported a major renovation within the past year. The renovation turnedout to be a full roof repair certainly significant, but having little impact onpatient care or satisfaction. Another center based its response on a recentupgrade of its medical records system again a significant improvement for theorganization, but not one that a patient is likely to directly experience as animproved facility. Ultimately, varying interpretations of the meaning of majorrenovation compromised the usefulness of this measure.



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E. Capital Priorities

Health center organizations identified as essential or very important the followingneeds:

s Renovation 70%

s Equipment replacement or improvement 63%

s Expansion 53%

Statewide capital need totals $90 million, based on specific estimates of total costs foranticipated projects provided by 32 of 40 health center organizations. This figureappears reasonable when tested against industry standards, as discussed below.

Respondents identified 36 planned renovation or new construction projects. The

following bar graph indicates the size, in square feet, of those projects.

The graph shows that health centers capital plans are modest, with most projectsfalling on the smaller end of the scale. More than two-thirds (26 of 36) are renovationrather than new construction. Renovation is typically less expensive than newconstruction, although it is not always possible or appropriate.

To test whether the $90 million estimate of capital needs is reasonable, PCDC appliedstandard cost figures to two overlapping but different data sets from the survey.



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Each test provided corroboration for the $90 million figure. The data sets are:

s the set of existing health centers reported in unacceptable or barely acceptablecondition, and

s the set of projects that the respondents identified as planned (those in thechart above).

Applying a standard renovation cost (including all design and construction costs) to theset of centers in poor condition, one arrives at a capital need of nearly $70 million.This figure does not account for the equipment and/or expansion needs of all theremaining health centers, which could reasonably total $20 million or more. Usingstandard renovation and new construction costs, as applicable, for the plannedprojects, one arrives at a figure of approximately $80 million. To that number one mustadd equipment and other needs at all other sites around the State. Both tests supportthe overall capital need figure of $90 million.



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F. Funding Sources

Most health centers indicated they intend to rely upon grants and fundraising as thekey funding sources for their capital projects: 62% of responding centers named

grants alone or in combination with other sources, with the remaining centers splitevenly (at 19% each) between internal sources of equity and debt financing.

These responses are consistent with the financial condition of health centers (seeSection IV, Financial Condition, below). With little equity to invest and limited capacityto carry debt, health centers must rely upon free money. Unfortunately, given theoverall lack of available grant funds and the typically low level of fundraising attainableby health centers in low-income communities, this suggests that very few capital

improvements will occur any time soon.

The example of the following Downstate health center is instructive:

For more than ten years, this health center has been planning the relocation of itsdeteriorated main site. Although the center is among the top tier in the State interms of financial performance, the major stumbling block preventing relocation hasbeen capital funding. As its operating revenues have been squeezed and itsmargin for capital has become extremely thin, its ability to take on debt to pay forits capital needs has severely eroded. To compensate, this center has workedhard to raise more than 50% of the funds it needs from government and private

foundation grants. Even with the success of its fundraising efforts, the center willstill need to supplement this fundraising with long-term debt. The length of timerequired to raise funds has lost it several siting options. While the center now hasan opportunity to construct a new site, this option, too, may be lost if the center isunable to put together a sufficient funding package within a given timeframe.

This example is repeated across the State.



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IV. FINANCIAL CONDITION

Current financial conditions impair health centers access to capital. As medical

providers for the uninsured, health centers have traditionally operated with narrowfinancial margins. However, in transitioning to managed care, health centers areexperiencing increasingly volatile finances. As a result, few health centers currentlyhave either the operating surpluses to invest in facility upgrades or the credit profile toborrow money to finance a complete facility renovation, especially at the dollar levelsnecessary to modernize the older and larger main sites. This problem is exacerbatedby the loss of capital reimbursement under managed care.

In past years, federal and State grant programs were available for these purposes.These programs have largely been eliminated. Wealthy donors, in the category thatoften fund museums, hospitals and other major not-for-profit facilities, have never been

effectively available for health centers in poor communities.

Although the capital needs survey did not investigate the financial capacity of healthcenters, this factor is essential for understanding and framing solutions to this problem.

The United Hospital Fund (UHF) recently analyzed the financial status of healthcenters in New York State, using cost data submitted to the State for 1996-1998. Theresults reveal a steady erosion of financial health over the three years despite anincrease in patient volume. The change in two key financial indicators current ratioand operating margin highlights this decline:

s The current ratio for federally-qualified health centers (FQHCs) declined steadily

over the three years, and dropped below 1.0 in 1998. The current ratio is ameasure of a business ability to pay its bills over the coming year and is derived bydividing current assets by current liabilities. The current ratio must be at least 1.0(i.e. current assets are at least equal to current liabilities) for a sustained period ifthat business is to remain viable.

s Over the three years measured, FQHC margins started at zero and declined tonegative 0.8%. For other voluntary health centers, margins dropped to negative2.6%. The operating margin compares revenues from operations to expenses. Apositive margin indicates that a business is generating sufficient revenues to pay itsbills. A negative margin indicates that the business must use accumulated savingsor fundraising to cover on-going expenses. Not-for-profit health care providers inNew York typically seek margins of one to two percent.


UHF published its findings in the Summer 2000 edition of Currents, a quarterly UHF publication. 33 of the 40 respondents to this survey are FQHCs.


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The charts below show these trends:

Roughly half the centers had a negative margin in each of the three years of theanalysis. More telling, however, is the financial volatility experienced by individualcenters. Fully 83% had a negative margin in at least one year, and almost half of thetop performers in 1996 were among the lowest performers in 1998.

This volatility ensures that health center managers are frequently engaged in crisismanagement, undermining their ability to undertake and act on long-term planning.The lack of financial predictability also ensures that health centers have virtually noaccess to conventional capital markets, particularly at the dollar levels required to fullyrenovate their older and larger main sites.


Charts provide median values for New York State FQHCs based on UHF analysis of AHCF-1 costreports submitted by 28 FQHCs to New York State Department of Health, 1996 to 1998.


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V. TOWARD A SOLUTION: LEVERAGED GRANT FUNDS

The survey paints a picture of many health centers across the state with older, larger

facilities in urgent need of modernization. Because the capital needs of CommunityHealth Centers exceed their financial resources, infrastructure investment, especially inthe oldest and largest facilities, has long been delayed.

Given their mission and the transition of New York States health system, CommunityHealth Centers are unlikely in the short run to achieve the adequacy or predictability ofoperating revenue necessary for them to finance their own capital needs orsuccessfully access the credit markets. Yet, they remain an increasingly valuableresource to their communities.

Several policy options could help address these long-standing capital needs, including

enhanced payment for indigent care and the restoration of capital reimbursementunder Medicaid managed care. An alternative strategy, that could have a moreimmediate impact, is to make a measured public investment in New Yorks communityhealth infrastructure, thus reducing the portion of capital needs requiring debt financingor dependent on fundraising.

Accordingly, PCDC and CHCANYS propose that New York State appropriate$25 million into a Community Health Center Capital Program. For maximum effect, thisprogram should be:

s Structured as a leveraged grant program, with State funds available only whenequally matched by funds from other sources. The certainty of a State grant

source, with the incentive provided by the match, would leverage funds from theprivate philanthropic sector and other levels of government, and do so withinthe predictable time frames necessary for successful facility development. Itwould also leverage loan funds to create affordable debt financing.

s Administered by an impartial intermediary, with targeted underwriting and facilitydevelopment skills, to assure accountability and the long-term viability of theinvestment. The intermediary should have the expertise and flexibility to workwith the State, the health centers and the various additional funding sources(the match funders) banks, foundations, local governments and the federalgovernment. Grant funds would be apportioned regionally, with oversightthrough the New York State Department of Health.

The approach of making a limited public investment in New York States communityhealth infrastructure is a doable and substantial step toward solving the problem. At$25 million, the States commitment will leverage equal commitments from otherquarters. A total of $50 million, while meeting roughly half of the total estimatedstatewide Community Health Center capital need, will be an enormous step forward.



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This approach also builds upon the successful experience of the Primary CareDevelopment Corporation. Established to address this problem in New York City,PCDCs programs have invested $100 million in the modernization, expansion andcreation of 28 new or expanded health centers since 1994. Despite these successes,thinner margins and increased financial volatility mean that a number of largefreestanding health centers cannot afford even the low-cost financing available throughPCDC programs. In addition, there is no PCDC-equivalent outside of New York City.Accordingly, despite a great deal of progress, the problem of upgrading some of theStates oldest and largest Community Health Centers remains unresolved.

A State-funded $25 million leveraged grant pool offers a responsible, achievable,affordable and badly needed solution. It will be a wise investment in the health of NewYork State communities and the success of its health system.

* * *



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Beyond BandaidsThe Need to Rebuild New Yorks Community Health Centers Appendix A


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Beyond BandaidsThe Need to Rebuild New Yorks Community Health Centers Appendix B


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2001 Primary Care Development Corporation. All Rights Reserved.

Primary Care Development Corporation291 Broadway, 17th Floor, New York, New York 10007

Telephone: 212-693-1850 Fax: 212-693-1860Web: www pcdcnyc org

beyond bandaids: the need to rebuild new york's health centers

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