We know that no matter how much a hospital wishes to provide a community with state-of-the-art healthcare, nothing can happen if there’s no money available to fund renovations, additions, or design and construction of a replacement hospital. That’s why we’re spreading the word in as many ways as possible that HUD 242 may be the answer to the funding question. If you aren’t familiar with HUD 242, check out David Brown’s recent blog post on Healthcare Design Magazine’s website.
Following is a checklist that outlines some of the critical steps in the project development and construction processes, along with a few tips to consider in evaluating use of the HUD 242 program.
During Project Development:
1. The owner will need to coordinate with the program manager and hire professionals such as an FHA mortgage banker to manage the financing part of the process.
2. The entire project team will need to be involved in the HUD pre-application meeting and the HUD site meeting at the hospital. (For critical access hospitals, these meetings may be combined.)
3. The site selection will need to be carefully evaluated. As the guarantor of project financing, HUD needs to be assured that the site is free of liabilities. Environmental assessments (Phase 1 and any subsequent evaluations), historical surveys, geotechnical investigation, noise pollution studies, a title insurance policy, documentation of proper zoning, the availability of all utilities, and ALTA land surveys all may be required as part of HUD’s evaluation process.
4. Drawings and specifications will need to meet the AIA’s Guidelines for Design and Construction of Healthcare Facilities (2006 Edition), National Fire Protection Association Life Safety Code (2006 Edition) and ADA Guidelines (28 CFR 36 Revised July 1, 1994), under which HUD is currently reviewing projects, as well as all state/local agencies’ regulations. Even if your state does not use the same guidelines as HUD, your architect will need to review the design by both sets of standards and resolve any conflicts with both agencies.
5. The architect needs to closely review DAE’s 2.1 Guide for Project Applicants Design and Construction Related Activities and, if construction-managed, 2.4 Guide for Project Applicants Construction Management Services. These guidelines closely detail DAE’s expectations for each phase of design – Schematic Design (Stage I), Design Development (Stage II), and Construction Documents (Stage III). Each of these phases requires a submission to the assigned DAE project manager. The mortgage banker can often assist the construction team by coordinating the submissions of drawings/specifications to HUD, along with associated financing components, to ensure consistency and avoid confusion among the various federal agencies involved in the FHA review process.
6. HUD/DAE typically takes 4-6 weeks to review and return comments for the design team’s response. HUD will also have review comments on the financial portion of the submission.
7. If the job is construction-managed, which is highly recommended, close coordination will need to occur between the CM and Architect to develop Division I of the construction specifications.
8. HUD requires open bidding on all construction trades. Specifications must list three manufacturers and consultants and include an “or approved equal” clause. Generally, DAE will not allow proprietary specifications. However, if your architect and mortgage banker can present a strong case that a particular project will benefit from using a particular product, exceptions can be approved.
9. HUD projects require that all work for construction be included under the Owner-Architect Contract. Therefore, it is recommended that signage drawings, landscape drawings, food service drawings, etc. all be a part of the documents.
10. Alternates or allowances are not allowed on HUD projects so your architect must be able to help facilitate decision making by hospital leadership regarding the scope of the project early in the process.
During Construction:
1. The principal of record will be required to attend each of the monthly Owner-Architect Contractor (OAC) meetings or specifically designate an approved associate. A DAE project manager will also be in attendance and will prepare a progress for HUD, required as a part of the pay application process for approving disbursement of funds. Thorough minutes of the OAC meetings by the architect can assist DAE in preparing an accurate progress report.
2. Special attention must be paid to the pay application process for a HUD project, as monthly pay application forms must be reviewed and approval by several different parties in different parts of the county, before mortgage proceeds can be disbursed. Delays can be avoided when the construction manager or general contractor provides a complete and accurate pay application with complete back up, and the mortgage banker prepares an accurate mortgage loan draw request.
With HUD/DAE approval, the owner’s contingency can be released for funding options or unforeseen expenses in construction, typically in an amount directly proportional to the percentage of the project that has been billed. This process for receiving approval for the use of contingency for change orders can also be accomplished relatively expediently if planned in advance.y understanding each step of the process and ensuring all submittals are correct the first time, timelines can be accelerated. Recently we were able to shorten a typical loan approval by half the standard time. The HUD process is complex but finding experienced partners is the key to coordinating financing and design, and navigating federal, state, and local reviews. Done properly and efficiently, affordable financing that might not be available otherwise can be obtained.
There’s no question that, without access to affordable funding, many independent community hospitals will struggle to stay independent as they look for ways to renovate, expand, or replace aging facilities. As this article demonstrates, it takes the kind of team effort that was displayed by Effingham Hospital in Springfield, Georgia to secure the necessary financing to renovate and expand their hospital to better serve a growing community. JJCA is proud to have been a part of the team – providing a master plan designed to get maximum value for minimum cost – a goal that HUD needed to be convinced would be met in order to approve funding.
We’ve learned through our involvement in more than a half dozen HUD 242 projects with hospitals across the country the importance of having both a financial partner, like InnoVative Capital, and an architect firm experienced in the intricacies of HUD 242 to successfully navigate the process. Learn more about this important partnering process here.
“Without JJCA’s help, I don’t believe we would have been successful in obtaining the HUD-242 financing that not only allowed us to complete the third phase of our existing space plan, but gave us the opportunity to build a second hospital in a neighboring community.”
–Kyle McDermott Adm. Director of Construction and Materials Management Johnston Medical Center
We’ve been working with our friends at Johnston Medical Center since 1995, supporting them in their vision of creating an entire medical campus. And we think they were pretty smart when they decided to build an outpatient clinic – not on the site of their major campus in Smithfield – but in nearby Clayton, North Carolina. In order to prepare for the population growth coming south from Raleigh, they chose a 76 acre site in Clayton that would accommodate expansion from the initially planned 56,947 SF to 110,000 SF, and eventually to a full-blown community hospital of more than 200,000 SF. But as most community hospitals know, the best laid plans for growth are just plans if funding is not available. We’re
glad we were able to bring our experience with HUD-242 financed projects to the table for Johnston Medical Center. With low-rate financing approved, we were then able to work with JMC to develop a flexible design that will support the incremental growth that will occur over the next 10 – 15 years.
Phase 1 of the new hospital, completed in August of 2009, includes the 24 hour ER, radiology, 2 OR surgery departments, PACU and outpatient staging and recovery, a small lab area, and general support functions. All departments planned on a 29′ x 29′ structural bay to maximize flexibility as technology changes. Core elements, like the kitchen, location of mechanical rooms, corridors for future connection, and perimeter drives, were designed to accommodate future room additions. Parking, water treatment, and site circulation were also designed with growth in mind. Plus, green design principles for storm water treatment with the use of bioswales provided project cost savings.
Construction workers celebrate as steel is topped out on a major expansion project at Effingham Hospital in Springfield, Georgia. Exterior studs are being installed, interior layout is beginning in the basement, the long term care canopy has been installed, retaining walls are nearing completion and construction and color mock-ups are finalized. When completed, the new, 57,621 square foot, two-story community hospital addition will include new admitting, emergency, surgery, central sterile, outpatient surgery, lab and imaging departments.
Wondering about the significance of the evergreen and flag seen atop the steel beam in the photo of Effingham’s topping out celebration? Here’s a little history on these events:
Placing of an evergreen tree upon a structure is said to symbolize growth and is believed to bring luck. State and national flags are often raised atop the structure as well. Ceremonies often take place during lunch time and can include a catered meal and entertainment. In large building construction, the topping out beam may be signed by the ironworker crew, or by local dignitaries depending on the importance of the building. Ironworkers may take this as an opportunity to publicize their union local. The beam is signed on the ground before it is hoisted into place by crane. The height of the ceremony takes place when the piece of steel is lifted into place and secured (although not completely). Often, the final piece of steel has little or no structural significance to the building.
Effingham had all the bases covered for their celebration – evergreen, flag, signed beam and a meal.
