House passes bill to add incentives and expand Rural Hospital Loan Program to include closed hospitals that reopen

Graphic from Gov. Andy Beshear's December press conference

UPDATE: March 29, HB 364 passed out of the Senate 35-0 with a committee substitute. The House concurred in the changes and the bill is finally passed. 

UPDATE, March 22, HB 364 passed out of the House 94-0.

By Melissa Patrick

Kentucky Health News

A bill to update the Kentucky Rural Hospital Loan Program to add incentives and include some closed hospitals has passed unanimously in the House and is in the Senate for further consideration. 

House Bill 364, sponsored by Rep. Danny Bentley, R-Russell, builds on 2020 HB 387, which created a revolving loan fund for distressed rural hospitals, and 2021 funding of $20 million.

The original bill, also sponsored by Bentley, allows the Cabinet for Economic Development to provide loans to struggling hospitals to maintain or upgrade facilities; maintain or increase staff; or provide health services not currently available. The loans can run 20 years and are available to hospitals in counties with fewer than 50,000 people.

So far, Pineville Community Health Center is the only hospital to be approved for a loan from the Kentucky Rural Hospital Loan Program. It received a $1 million loan at 1% over a five-year term in December to be used for operating expenses. 

HB 364 would expand the type of rural hospital that would qualify for a loan to include a "qualifying former hospital," or one that closed within 36 months prior to submitting its loan application that also has a certificate of need to open or reopen the facility.  

Five rural hospitals have closed in Kentucky since 2009, four since 2014. The most recent was Our Lady of Bellefonte Hospital in Russell, Bentley's hometown; it closed in April 2020. 

Rep. Danny Bentley

At the Feb. 17 House Health and Family Services Committee meeting, Bentley said Bellefonte is planning to repurpose its facility to include a psychiatric hospital that includes a "detox center" and space to "rehab residents. . . . I had to repurpose the bill, because they are repurposing the hospital." 

HB 364 would also provide an incentive for rural hospitals to be able to get as much as half 50% of a loan forgiven. It would require a maximum amount of $20,000 to be forgiven for each job retained or each new, full-time job created that meets certain wage requirements. 

The bill also provides that hospitals in a chain would be considered separately for the purposes of determining eligibility and loan limits. An emergency clause in the bill would make it take effect immediately. 

A 2020 report from the Kentucky Hospital Association said "anywhere from 16 to 28" of the state's 68 rural hospitals were at risk of closing. A separate analysis in 2021 by the Center for Healthcare Quality and Payment Reform found that 16 of the 69 Kentucky hospitals it considered rural were at risk of closing.