Cost of capital to the hospital sector

Frank A. Sloan, Joseph Valvona, Mahmud Hassan, Michael A. Morrisey

Research output: Contribution to journalArticlepeer-review

28 Scopus citations


This paper provides estimates of the cost of equity and debt capital to for-profit and non-profit hospitals in the U.S. for the years 1972-1983. The cost of equity is estimated using, alternatively, the Capital Asset Pricing Model and Arbitrage Pricing Theory. We find that the cost of equity capital, using either model, substantially exceeded anticipated inflation. The cost of debt capital was much lower. Accounting for the corporate tax shield on debt and capital paybacks by cost- based insurers lowered the net cost of capital to hospitals.

Original languageEnglish (US)
Pages (from-to)25-45
Number of pages21
JournalJournal of Health Economics
Issue number1
StatePublished - Mar 1988
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Health Policy
  • Public Health, Environmental and Occupational Health


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