WASHINGTON – The U.S. Department of Housing and Urban Development has made it possible for hospitals to refinance debt under the HUD/FHA Section 242 Hospital Mortgage Insurance Program, without conditioning such refinancing on new construction or renovation.

In addition to issuing a notice outlining how it will amend the regulations, HUD plans to publish a rule to make refinancing a permanent component of the Section 242 program.

Hospitals seeking refinancing may apply under notice, or wait for HUD to issue the debt-refinancing rule.

Lancaster Pollard, a Columbus, Ohio-based financial advising and investment banking firm, believes there should be "considerable interest in this new refinance opportunity, especially given the difficulties many hospitals are having with their current debt structures."

Approval of the new refinancing option means hospitals have a "lower-cost, non-risk-based way to refinance loans, get out of troubled banking relationships, and create a stable, fixed-rate, long-term financing structure," the company said.

The American Hospital Association also endorsed the regulation change, given the difficulties hospitals have encountered accessing capital during the recession.

In May, the AHA wrote a letter to the House Financial Services Committee, noting that hospitals' "inability to refinance existing debts has forced many to divert needed patient care resources to pay down current obligations, often at accelerated rates."