Determinants of hospital tax-exempt debt yields: corrections for selection and simultaneous equation bias.

Abstract:

:The cost of capital for hospitals is a topic of continuing interest as Medicare's new capital payment policy is implemented. This study examines the determinants of tax-exempt revenue bond yields, the primary source of long-term capital for hospitals. Two important methodological issues are addressed. A probit analysis estimates the probability that a hospital or system will be observed in the tax-exempt market. A selection-corrected two-stage least squares analysis allows for the simultaneous determination of bond yield and bond size. The study is based on a sample of hospitals that issued tax-exempt revenue bonds in 1982-1984, the years immediately surrounding implementation of Medicare's new payment system based on diagnosis-related groups, and an equal number of hospitals not in the market during the study period. Results suggest that hospital systems and hospitals with high occupancy rates are most likely to enter the tax-exempt revenue bond market. The yield equation suggests that hospital-specific variables may not be good predictors of the cost of capital once estimates are corrected for selection.

journal_name

Health Serv Res

journal_title

Health services research

authors

Carpenter CE

keywords:

subject

Has Abstract

pub_date

1992-12-01 00:00:00

pages

695-713

issue

5

eissn

0017-9124

issn

1475-6773

journal_volume

27

pub_type

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