An interest in improving inner-city neighborhoods led Allison Coleman to focus her career on nonprofit finance. But it wasn’t until representatives from the Massachusetts League of Community Health Centers came knocking on her door in the early 1990s that she got involved with healthcare specifically. She now leads Capital Link, an organization which provides technical and lending assistance to health centers across the country who need to access capital markets in order to expand or improve their facilities.
Allison Coleman
Title: CEO, Capital Link; Boston
Age: 48
Experience: 21 years
Q: How did you first get involved with community health centers?
A: [In the early 1990s,] I had been working at the Massachusetts Industrial Finance Agency (MIFA). I was working on tax exempt bond financing, mostly for nonprofits but also for some small businesses. It was a very difficult financing environment. The health centers were smaller, at the time, not well-known by the lenders, and for the most part, they would come, they would want tax-exempt bond financing, and for one reason or another it always seemed like it never ended up working out…So finally a group of health centers sort of showed up at MIFA and said, ‘You guys say no to a lot of our health centers and we want to know why, and isn’t there something we can do about it?’
Q: It seems like Capital Link grew out of those early MIFA discussions as you learned more about the specific problems of community health centers. What’s Capital Link’s role today?
A: We work with health centers all across the country… helping health centers do market assessments and write business plans and figure out how much space they’ll actually need to serve new markets… and then put together packages that we can then take out to a variety of lenders and say, ‘Here’s a deal that needs financing, and here are the merits of it.’ There’s also a portion of what we do which is also providing pieces of the capital ….One of the challenges is a lot of the larger lenders don’t really understand health centers very well, they don’t understand their credit profiles and it’s difficult for them to kind of get comfortable with this new niche. So sometimes the way we use our loan fund is that we’ll provide a piece of subordinated debt…[B]ecause we’re in the deal and taking the riskiest piece, they’ll then figure if we’ve provided the technical assistance and we know the health center and we feel good about the project and we’re willing to take the highest risk piece of capital, maybe they’ll take a look at it too. So it’s a way of getting more money to be invested in health centers as they grow.
Q: It seems like health centers might have some unique needs when it comes to what they actually want to do with this capital. Does that present a problem for getting a program financed?
A: If you think of your classic community health center, you have a special-use facility. You have a lot of exam rooms, every one of which has to have plumbing. Most of them now are also wired for internet access, in order to access electronic medical records. So they are special-use facilities, and it’s one of the reasons why it’s sometimes difficult to finance them, because as far as alternative uses of the facility, if it’s not going to be used as a health center, you still have all these exam rooms with sinks in them. That’s one of the reasons lenders sometimes have difficulty financing them, because they don’t appraise out in the way straight office space would…[sometimes] the appraisals will come out lower than the cost of building it. And since most lenders are only able to lend at 75 percent to 80 percent loan to value, it makes it hard. Even if the health center can show from a cash flow perspective it can afford a loan, you still have to deal with the collateral issues. So that’s why when we’re putting together financing we have to get creative.
Q: What is the most challenging project you’ve done recently?
A: One of the projects that we just completed financing for, the Whittier Street Health Center project in Roxbury, included two community development corporations, one investor, [and] two lenders, Boston Private Bank as well as Boston Community Capital. It included several large grants from hospitals, a federal capital grant that was part of the stimulus bill, and a mix of other small, private foundation grants and private fundraising. Unfortunately, that type of [deal, with] 15 different sources of primary capital all having to come together and work through this kind of complex financing mechanism is more the norm than the exception.
Q: What has the impact of health reform been on community health centers?
A: We’ve seen just a tremendous growth among health centers in Massachusetts, as a result of everybody having a health insurance card and needing a place to go for their primary and preventive care. Obviously, you need specialists, but we need to have a balanced system. So as other states start to look at what will their health reform needs look like, there’s this huge need for growth at the primary care end of the spectrum. Health centers nationally now serve 20 million patients, but are expected as a result of health reform to serve 40 million over the next five years. So it’s a big level of growth and there are capital needs associated with that growth.
The Top 5 Things Lenders and Health Centers Need To Know About Each Other:
- Lenders: Primary care is growing
- Lenders: Get to know the industry. Health centers have complex funding, and the real risks aren’t the same as the perceived risks.
- Lenders: Think long-term. Aging populations and chronic diseases are on the increase.
- Health Centers: Growth is a planned process. Meeting capital needs takes time and preparation.
- Health Centers: Don’t let today’s uncertain funding environment lead to strategic paralysis.
