USDA Offers Funding for Healthcare Providers Serving Rural Areas

Rural healthcare providers that seek funding for capital expenditures, equipment, vehicles, or telemedicine infrastructure for their programs should make themselves aware of special funding opportunities through the United States Department of Agriculture.

The three programs of immediate interest to rural healthcare providers are: (1) the Community Facilities Direct Loan & Grant Program; (2) the Community Facilities Loan Guarantee Program; and (3) Distance Learning and Telemedicine Grants. In New York alone, the Community Facilities programs have financed hospital expansions, the purchase of air ambulance helicopters, and the purchase of vehicles for health outreach services. The programs are discussed in more detail below, but it is important to note at the outset that the Community Facilities programs restrict eligibility to not-for-profit providers, public entities, and federally recognized tribes, while the Distance Learning and Telemedicine Grant program permits for-profit entities to apply as well as not-for-profits.

The Community Facilities Direct Loans and Grant Program permits the USDA to provide funding to develop “essential community facilities” in rural areas. The definition of essential community facilities includes all types of health care facilities such as hospitals, medical clinics, dental clinics, nursing homes, or assisted living facilities, and can also include utility services such as telemedicine. However, “private, commercial, or business undertakings” are outside the definition of an essential community facility.

In addition to the not-for-profit eligibility, the provider must be located in an eligible “rural area,” which for the Direct Loan & Grant program is a municipal area with less than 20,000 residents, per 2010 census levels. Also, applicants must be unable to finance the project from their own resources and/or through commercial credit at reasonable rates and terms.  There is also a requirement that the project demonstrates “substantial community support” in addition to receiving an acceptable environmental review.

The loans and grants are awarded through a competitive process with a priority point system.  While the loans can fund 100% of a project’s costs (subject to the availability of loan funds), the grants are limited to 75% of a project’s costs, which can be further reduced for larger municipal areas or with a higher level of median income.  The interest rate on loans is regularly recalculated, and the current rate is 2.875%.  Loans repayment terms may not extend beyond the useful life of the facilities or 40 years, whichever is longer.  There are no upfront or application fees and there are no prepayment penalties for the loan program.

The program also allows the grants and loans to be combined with each other and other funding vehicles if other eligibility and feasibility requirements are met.

The Community Facilities Loan Guarantee Program serves the same goals as the loan and grant program but, instead of direct lending or grants, provides loan guarantees to eligible private lenders to help build essential community facilities in rural areas. The eligibility criteria for the loan guarantees are essentially the same, but in this program, private lenders may apply for a loan guarantee on loans made to an eligible borrower that is unable to obtain the needed commercial credit on reasonable terms without the guarantee. Eligible geographic areas are also capped at 20,000 people. The guarantee is maxed out at 90% of the eligible loss and there is a one-time guarantee fee (1% of principal loan amount times the % of guarantee) that a lender may pass along to the borrower. The loan guarantee may also be combined with direct loans and grants and other funding vehicles if all eligibility criteria are met.

The Distance Learning and Telemedicine Grant Program help rural communities use the unique capabilities of telecommunications to connect to each other and to the world, overcoming the effects of remoteness and low population density. For example, this program can link teachers and medical service providers in one area to students and patients in another. Eligible applicants include most entities that provide education or health care through telecommunications and include for-profit providers.

The application window for these grants is announced annually (typically after the first of the year) through a Notice of Funds Availability (NOFA) or a Notice of Solicitation of Applications (NOSA) in the Federal Register. Applicants are required to provide a minimum 15% match which cannot be from another federal source. Awards can range from $50,000 to $500,000 and may be used to purchase audio and video equipment, computer hardware, network infrastructure, software, training, and technical assistance.

Providers and community groups seeking further information about these programs may contact our healthcare lawyers at (518) 462-5601.