TY - JOUR
T1 - Cost of capital to the hospital sector
AU - Sloan, Frank A.
AU - Valvona, Joseph
AU - Hassan, Mahmud
AU - Morrisey, Michael A.
N1 - Funding Information:
*This study was funded by Grant HS-05176 from the National Center for Health Services Research and Health Care Technology Assessment. We thank the Hospital Research and Educational Trust for providing access to the data on hospital debt, Brian Pennington for advice during the early phases of this research, and Joseph Newhouse and an anonymous referee for useful comments on an earlier draft.
PY - 1988/3
Y1 - 1988/3
N2 - 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.
AB - 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.
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U2 - 10.1016/0167-6296(88)90003-3
DO - 10.1016/0167-6296(88)90003-3
M3 - Article
C2 - 10302653
AN - SCOPUS:0023730837
SN - 0167-6296
VL - 7
SP - 25
EP - 45
JO - Journal of Health Economics
JF - Journal of Health Economics
IS - 1
ER -