Hospital Feasibility Study

From $14,900, fixed fee, quoted before the engagement starts. 9 to 16 business days for most engagements, with hospital-scale scopes and delivery dates set at proposal. Prepared to USDA 7 CFR Part 5001, RD Instruction 1942-A and SBA SOP 50 10 8.1, with a contractual acceptance commitment written into the engagement letter. First response within 12 business hours.

MMCG Invest prepares the independent feasibility study that a rural hospital, hospital district, nonprofit health system or physician-owner group submits with a USDA Community Facilities application, a USDA Business and Industry guarantee, a bank construction loan or a bond financing. The study defines the service area from patient origin, models demand by service line, verifies the competing hospitals and clinics, prices the project and tests debt service coverage under the Medicaid and reimbursement conditions of 2026 and 2027. Where USDA requires a CPA examination opinion, MMCG builds the market, volume and payer-mix model the CPA firm attests to.

USDA Community Facilities is the main federal capital source for rural nonprofit and public hospitals. The enacted FY2026 program level is $1.25 billion in direct loans and $650 million in guaranteed loans, and FY2026 guarantees carry an 80% guarantee. Direct loans run up to 40 years and can finance up to 100% of project cost for borrowers in communities of 20,000 residents or fewer. Between 2000 and 2020 the program obligated nearly $6 billion to rural hospitals, about 27% of all Community Facilities lending, 82% of it as direct loans, and USDA's Economic Research Service found that funded hospitals had a higher probability of survival than comparable hospitals that did not receive funding.

The money is there, and much of it goes unused. In FY2024, $2.08 billion of the $2.8 billion direct loan authority lapsed. The projects that close are the ones that arrive with a complete, defensible feasibility package. Recent closings show the scale and the structure: $105 million for a 130,000 square foot replacement critical access hospital in Wisconsin, $79.1 million for a replacement hospital in Louisiana and $27.5 million for a five-operating-room expansion in Iowa, each a direct loan paired with a bank-held guaranteed tranche. Grants are small, almost entirely earmarked and tied to equipment or clinics, so a hospital study models the project as debt-financed.

Every Community Facilities guaranteed loan requires a financial feasibility report prepared by a qualified firm or individual acceptable to the Agency, demonstrating that revenues cover operation and maintenance, debt service and lender reserves. Under 7 CFR 5001.304(a), a financial feasibility analysis is sufficient where the guaranteed loan is $25 million or less to an existing facility, where the loan is secured by a general obligation bond or other tax-supported income, or where three years of audited statements show the borrower can carry existing and new debt. Under 7 CFR 5001.304(b), every other guaranteed loan requires a financial feasibility study with an examination opinion prepared under AICPA attestation standards by a firm carrying professional liability insurance.

Separately, any guaranteed loan over $1 million to a new entity, or to an existing entity starting a new activity, requires a feasibility study prepared by an independent qualified consultant. A critical access hospital adding behavioral health beds, a hospital district building an outpatient surgery wing and a Rural Emergency Hospital conversion are each a new activity. The study follows Appendix A of 7 CFR Part 5001 and gives a finding on each of five components: economic, market, technical, financial and management feasibility. Projections run at least through two years of stabilized operations with a pro forma balance sheet at closing, the application includes a certificate of need where state law requires one, and where the facility depends on an operator or management company, that business's viability is assessed as well.

Direct loans under RD Instruction 1942-A use the Guide 5 Financial Feasibility Report format, which hospital districts procure as a full projection study. The direct-loan regulation does not itself require a CPA examination; state offices often ask for one on large hospital direct loans as a matter of practice, and MMCG confirms the state office's position at preapplication.

Only a licensed CPA firm can issue the examination opinion under 7 CFR 5001.304(b). MMCG does not issue examination opinions and does not present itself as doing so. What MMCG prepares is everything the regulation allows an independent qualified consultant to prepare: the Appendix A feasibility study, the financial feasibility analysis, the Guide 5 report, and the service-area, demand, volume and payer-mix model that an examination-level study is built on. On examination-tier loans the CPA firm tests MMCG's assumptions; it does not usually build them. On analysis-tier loans, direct loans and every Business and Industry loan, the MMCG study is the feasibility record.

The Chartis Center for Rural Health's 2026 report, built on CMS cost report data, finds the national median operating margin for rural hospitals at 2.0%, 41.2% of rural hospitals operating in the red and 417 hospitals vulnerable to closure. In states that have not expanded Medicaid, 52.2% of rural hospitals lose money on operations and the median margin is negative. The University of North Carolina's Sheps Center counts 197 rural hospital closures and conversions since 2005, and 56 hospitals now operate as Rural Emergency Hospitals. Federal analysis of those closures identifies low occupancy, for-profit ownership and proximity to an urban county as the strongest predictors, and a hospital feasibility study tests each one explicitly.

A 2.0% median margin leaves no room for error in the pro forma. A replacement hospital has to show coverage from its own operations under stress cases, without grants, tax levies or transformation funds, unless a tax pledge is formally in place and documented in the application.

A Rural Emergency Hospital gives up inpatient care, swing beds and 340B pricing in exchange for a monthly facility payment, $295,051.54 a month in 2026 after sequestration, plus a 5% add-on to Medicare outpatient payments. Eligibility is limited to hospitals enrolled as of December 27, 2020 with 50 or fewer beds. Conversion is a renovation project, concentrated in the emergency department and outpatient space, and it fits Community Facilities direct loans combined with state transformation money for equipment. Because a conversion is a new activity, a guaranteed loan over $1 million requires the Appendix A study.

MMCG models both scenarios in one study: continued operation as a critical access hospital with cost-based reimbursement and inpatient revenue, against operation as a Rural Emergency Hospital with the facility payment, the outpatient add-on and the loss of inpatient, swing-bed and 340B income. The determination states which structure covers the proposed debt.

The Rural Health Transformation Program provides $50 billion over FY2026 to FY2030, distributed to states rather than to hospitals, with first-year awards averaging $200 million per state. Capital expenditures are limited to minor alterations, renovations and equipment at existing facilities, capped at 20% of an award, and new construction is not an allowable use. In a feasibility study, transformation receipts are treated as non-recurring, scheduled against the state's approved plan and kept out of base-case debt service coverage.

For-profit hospitals, including physician-owned specialty and micro-hospitals, cannot use Community Facilities. In rural markets of 50,000 residents or fewer they can use USDA Business and Industry guarantees of up to $25 million, with an 85% guarantee on loans under $5 million and 80% from $5 million to $25 million in FY2026, and terms up to 40 years. Business and Industry requires an independent feasibility study on guaranteed loans over $1 million to a new business and does not require a CPA examination. SBA's $5 million 7(a) cap and $5 million 504 debenture keep most hospitals outside SBA, and a physician-owned hospital that bills Medicare also carries the referral restrictions of Section 6001 of the Affordable Care Act, which the study treats as a revenue-model risk.

Community Facilities finances rural health clinics and federally qualified health centers on the same terms as hospitals, often alongside HRSA capital grants and New Markets Tax Credits, and small clinic grants continue to close. A clinic study tests the same questions at smaller scale: the shortage-area designation, the Medicaid and uninsured share, provider recruitment and the billing designation. Rural Health Clinic Medicare rates rise from $139 per visit in 2024 to $190 in 2028, which matters for clinics attached to critical access hospitals and for rural urgent care centers that qualify.

Two full model studies are published for this page: a replacement 25-bed critical access hospital financed by a USDA Community Facilities direct loan paired with a bank-held guaranteed tranche, and a closed rural hospital listed for sale, evaluated for reopening as a critical access hospital and as a Rural Emergency Hospital. USDA Community Facilities Feasibility Study Case Study: A $55 Million Replacement Critical Access Hospital in Milan, Missouri, Feasible With the Sales Tax Pledge · Hospital Feasibility Study Case Study: Reopening the Former Van Zandt County Hospital in Grand Saline, Texas, Not Feasible as Proposed

Send the hospital's location, the project scope, the program (Community Facilities direct, guaranteed or Business and Industry), the loan amount and whether the state office has indicated an examination opinion will be required. A senior analyst responds within 12 business hours with a fixed-fee proposal and a delivery date.