HUD Urged to Incentivize Nursing Home Quality Improvements

Members of the Moving Forward Nursing Home Quality Coalition are calling on the Department of Housing and Urban Development (HUD) to implement significant changes to its loan programs to better serve nursing homes.

In an editorial published on Monday in Health Affairs and co-authored by David Grabowski, a health care policy researcher based at Harvard, Alice Bonner, chair of Moving Forward, Richard Gamache, CEO of Aldersbridge Communities, and others, the coalition emphasized the urgent need for HUD to incentivize improvements in the quality and care models of nursing home facilities, specifically for those making transformations to “household models.”

“Nursing homes are people’s homes. With lower interest rates predicted for 2024, there’s no better time to align mortgage loans and associated costs with efforts to transform nursing homes to achieve the quality improvements that residents need. The federal government’s approach to financing nursing home care should be holistic—not siloed to individual governmental funding streams,” the authors wrote.


The authors underlined the alignment of their recommendations with HUD’s strategic goals for 2022–2026, which emphasize equity and improvement across all HUD programs without requiring congressional action. By strategically adjusting loan terms and insurance premiums, HUD could play a pivotal role in encouraging the broader adoption of household models in nursing homes, thereby enhancing resident outcomes and satisfaction, the authors noted.

The coalition members suggest that HUD should allow nursing home operators building household models or taking on associated improvements to borrow more than the amounts allowed under current rules.

Also key among the coalition’s recommendations is a proposal to lower the mortgage insurance premium (MIP) – a fee borrowers pay directly to insurers to reduce insurers’ risk – on loans for nursing homes that adopt household models or undergo associated physical plant improvements. Currently, the standard MIP stands at 65 basis points annually, but under the proposed “household model” such as that embodied by the Green House approach, this could be reduced to 25 basis points for qualifying facilities. Such a reduction aims to encourage investments in safety, privacy, and overall quality of life enhancements for nursing home residents, the coalition members said.


The coalition also seeks to enable these nursing homes to undertake more substantial renovations that would enhance resident care without compromising financial stability.

But this goal is limited, they noted, by HUD’s existing debt service coverage ratio (DSCR) – a figure that is used by HUD to measure a borrowers’ ability to repay loans and factors in their available cash flow to pay debt obligations. The ratio limits the borrowing capacity of nursing homes, particularly those heavily reliant on Medicaid funding, and HUD could allow for more flexibility in this regard.

“Given HUD’s traditionally conservative approach to loans, there is likely room to safely adjust coverage ratios for nursing homes committed to these projects,” the authors wrote.

The coalition is also advocating for waivers within HUD’s 232/223 program. Borrowers under this program are restricted to repairs and improvements that will not cost more than 15% of a nursing home’s value after the project is completed. The proposed waiver would eliminate the 15% repair threshold, allowing for the HUD loans to be used for facilitating more overarching transformations of existing facilities into household models that prioritize resident well-being and comfort.

“This restriction creates a barrier to the transformation of the nation’s nursing homes from traditional quasi-hospitals to shared homes offering skilled nursing. The bulk of this transformation will need to occur through the rehabilitation and remodeling of existing nursing homes.”

As the debate continues, coalition members remain hopeful that HUD will embrace these recommendations to foster a more supportive environment for nursing homes striving to enhance care standards.

The editorial was published ahead of HUD appropriations discussions taking place on Capitol Hill starting next Thursday.

Moving Forward is supported by The John A. Hartford Foundation.

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