Rural hospitals could apply for temporary interest-free construction, renovation loans under new bipartisan bill

Two senators have introduced new bipartisan legislation that would help rural hospitals fund construction and renovation projects with temporary interest-free loans.

Sens. Jerry Moran, R-Kan., and Michael Bennet, D-Colo., on Friday put forward the Rural Hospital Revitalization Act. Under the proposal (PDF), rural hospitals could request a five-year interest-free loan to construct new or renovate existing facilities. 

“Rural hospitals are critical to the well-being of the communities they serve in Kansas and across the country,” Moran said in a press release. “By providing a pathway for qualifying rural hospitals to make needed renovations and facility upgrades, this legislation will help promote the long-term viability of rural hospitals and communities.”

The proposal comes months after the launch of the $50 billion Rural Health Transformation Fund, which was authorized under the One Big Beautiful Bill Act. While it allows states to apply for rural health support funding, it does restrict using funds for most types of construction and renovation.

Funding for the Rural Hospital Revitalization Act would come from the U.S. Department of Agriculture’s (USDA's) Community Facilities Direct Loan Program. 

Hospitals would need to meet the following eligibility criteria to apply: 

• Be located within a county of fewer than 20,000 residents; and
  • Be located at least 35 miles from the nearest hospital, or at least 15 miles away if the hospital is in an area with mountainous terrain or only secondary roads; or 
  • Be designated as a critical access hospital or a rural emergency hospital
• Have demonstrated need
• Be financially stable, with not less than 30 days of cash on hand and in a projected debt-service coverage ratio of at least 1.2

However, the financial stability eligibility requirement could spell trouble for some facilities. In February, healthcare advisory services firm Chartis warned 41.2% of rural hospitals across the nation are operating in the red, and 417 facilities are “vulnerable to close” based on a model the firm developed.

After the initial five-year period, a financial stability reassessment would be conducted by the secretary of agriculture to determine whether rural hospitals would be able to have loans refinanced at rates offered under the USDA program. 

If a facility is unable to repay under a program rate, it could submit a one-time renewal application for another interest-free loan for a term of not more than five years.

Approved hospitals would also be eligible for grants from covered programs—like the Rural Hospital Technical Assistance Program—to “support operational improvements and improve financial stability” throughout the initial or renewal periods.