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Highlights

Under its Hospital Mortgage Insurance Program, the Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) insures nearly $5 billion in mortgage loans for the renovation or construction of hospitals that would otherwise have difficulty accessing capital. In response to a requirement in the 2005 Consolidated Appropriations Conference Report, GAO examined (1) the design and management of the program, as compared with private insurance, (2) the nature and management of the relationship between HUD and the Department of Health and Human Services (HHS) in implementing the program, (3) the financial implications of the program to the General Insurance/Special Risk Insurance (GI/SRI) fund, including risk posed by program and market trends, and (4) how HUD estimates the annual credit subsidy for the program, including the factors and assumptions used.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Housing and Urban Development To improve management of the Hospital Mortgage Insurance Program and reduce potential risks to the GI/SRI fund, the Secretary of Housing and Urban Development should direct the FHA Commissioner to establish measurable and objective performance measures for the hospital program and collect appropriate information to regularly assess performance against the measures.
Closed - Implemented
In February 2008 FHA formally adopted seven objective and measurable performance measures. The performance measures include goals and specific criteria for measuring the program's claim rate, diversification plan, and monitoring activities. Regular assessment of these performance measures will facilitate improved management of the Hospital Mortgage Insurance Program and reduce potential risks to the GI/SRI fund.
Department of Housing and Urban Development To improve management of the Hospital Mortgage Insurance Program and reduce potential risks to the GI/SRI fund, the Secretary of Housing and Urban Development should direct the FHA Commissioner to update the program handbook to make publicly available current eligibility requirements, policies, and procedures.
Closed - Implemented
HUD issued an updated Hospital Mortgage Insurance Program Handbook in May 2013. The handbook includes general eligibility requirements, application procedures, and other information for both program participants and HUD staff.
Department of Housing and Urban Development To improve management of the Hospital Mortgage Insurance Program and reduce potential risks to the GI/SRI fund, the Secretary of Housing and Urban Development should direct the FHA Commissioner to develop a formal strategy to geographically diversify its portfolio of insured hospitals, including such elements as the processes, skills, technologies, and various resources that will be used to reach diversification goals.
Closed - Implemented
To improve management of the Hospital Mortgage Insurance Program and reduce potential risks to the General Insurance/Special Risk Insurance Fund, we recommended that the Secretary of Housing and Urban Development direct the FHA Commissioner to develop a formal strategy to geographically diversify its portfolio of insured processes. In response to this recommendation, HUD issued a Geographic Diversification Action Plan on September 21, 2006 in an effort to reduce the credit risk associated with a portfolio concentrated in one region, and to enable more hospitals across the country to access the capital they need to bring health care to their communities.
Department of Housing and Urban Development To potentially improve HUD's estimates of the program's annual credit subsidy rate, the Secretary of Housing and Urban Development should explore the value of explicitly factoring additional information, such as prepayment penalties and restrictions, as well as the initial debt-service coverage ratio of hospitals, as they enter the program into its credit subsidy model.
Closed - Implemented
HUD explored the value of including additional information in its credit subsidy rate.

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