Section 232 also known as The Healthcare Insurance Program

Infrastructure

Health Affairs had an article on the Biden-Harris Administration progress on the infrastructure of the 15,000 nursing homes throughout the U.S. These facilities, which reside the most vulnerable members of our community, should be able to accommodate their needs. The physical environment of the nursing homes should protect residents’ privacy, dignity, safety, and quality of life. For example, customized private rooms and bathrooms, additional access to outdoor spaces and community areas, as well as smaller units with consistent staffing.

As of January 2022, long term care residents and staff accounted for at least 23 percent of all COVID-19 deaths. The federal government has authority to regulate staffing, safety, and quality. This includes increasing oversight of nursing home ownership and encouraging vaccination. In response, the 2022 Executive Order states, “committed to building a long-term care system where all seniors can age with dignity, where people with disabilities can age with dignity, where people with disabilities can receive high-quality services and supports in the setting of their choice.”

The National Academies of Sciences, Engineering, and Medicine suggests that facilities renovate their homes to provide “smaller, more home-like environments and/or smaller units within larger nursing homes that promote infection control and person-centered care and activities.”

This recommendation is geared towards CMS and HUD to create incentives for the implementation of smaller, more home-like facilities. Members of the Moving Forward Nursing Home Quality Coalition, joined with support from The John A. Hartford Foundation, are in favor of the 232 program to incentivize quality improvements within nursing homes.

Section 232 also known as The Healthcare Insurance Program

The Department of Housing and Urban Development (HUD), Section 232 also known as The Healthcare Insurance Program, insures mortgage loans geared towards nursing homes. Section 232 outlines that loan applicants must meet financial requirements, but Section 232 fails to contain any provisions to increase quality of care.

The main goal for HUD is to reduce all forms of financial risk which ties to CMS’s Nursing Home Compare Five-Star Quality Rating System. HUD reducing mortgage insurance costs for nursing homes, will lower MIPS for qualifying facilities from 65 basis points annually to 25 basis points. Secondly, HUD could identify specific certifications required for nursing homes to qualify for this incentive. Mortgage insurance reflects safety, privacy, and quality of life for
residents, therefore reducing these costs will ultimately benefit the residents.

HUD restricts the amount of money a borrower under the program can receive under the debt service coverage ratio. Currently the ratio is between 1.10 and 1.45. For every $1.00 in debt, nursing homes must generate between $1.00 to $1.45 in revenue. Lowering debt service, could incentivize and allow for facilities that serve the low-income population, to be rebuilt and remodeled in ways that improve resident care.

HUD offers insurance for refinancing preexisting HUD projects as well as loans for purchasing nursing home facilities. Section 232/223(f) offers terms that are more favorable for new construction of nursing homes. Borrowers are restricted to repairs and improvements that cost no more than 15 percent of the facility value after project completion. By waiving the 15 percent repair threshold under Section 232/223(f), the program will encourage the development
of household model nursing homes.

With the low interest rates predicted for 2024, aligning mortgage loans and associated costs to transform nursing homes will allow nursing homes to thrive in their quality care levels. The nursing home community should work with HUD to develop and implement safe approaches within facilities.