News | May 25, 2010

Thirteen Percent of Small Business Loans Went to Health Care

May 26, 2010 – Radiologist Ronald Cooper, M.D., borrowed $1.5 million to buy and expand services at a magnetic resonance imaging (MRI) facility in Vero Beach, Fla. Cooper is among the 5,000 doctors, dentists and health care providers who have borrowed more than $2.5 billion in government-backed loans under the economic stimulus law.

California received the largest number of loans, 882, for a total of $389 million. Critics warn these loans threaten to put health care in even greater debt and could drive up insurance premiums.

The government backed $19.6 billion in loans under the American Recovery and Reinvestment Act of 2009, either reduced or waived many of the associated costs. As part of the Recovery Act, the U.S. Small Business Administration (SBA) received $730 million to help small businesses, including $375 million to increase the SBA guarantee on 7(a) loans to 90 percent and to reduce borrower fees on most 7(a) and 504 loans. Thirteen percent of those loans went to businesses in health care.

“Small businesses across the country have been able to secure critical financing as a result of the Recovery Act loan provisions and the continued interim funding we’ve received for the program,” said SBA Administrator Karen Mills. “The increased guarantees and reduced fees on SBA loans have generated more than $25 billion in new loans to small business owners and brought more than 1,200 lenders back to SBA loan programs. These programs have been successful in helping jump- start our economy, which is why we will continue to work with Congress on a longer-term extension of the increased guarantee and reduced fees.”

The largest recipients of these loans issued stimulus program, to health care-related businesses from February 2009 to April 2010, included the following states:
- California 882 loans at $389 million
- Texas 689 loans at $322.7 million
- Florida 515 loan at $210.8 million
- Georgia 251 loans at $122.7 million
- New York 458 loans at $110 million
- Arizona 251 loans at $104.5 million
- Washington 261 loans at $104.2 million

Source: U.S. Small Business Administration

While these loans have spurred new business and sustained existing facilities, these loans add to health care already enormous debt, which could drive up not only costs to taxpayers but also insurance premiums.

Furthermore, health care providers did not have to prove a need for new or expanded services to get the loans.

Still, doctors contend the loans will benefit consumers by offering health care services that would otherwise not be available. For medical imaging, in particular, Medicare reimbursement cuts threatened to close down many centers, which would have limited many patients’ access to diagnostic imaging.

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