Advanced Search
MyIDEAS: Login to save this article or follow this journal

Determinants of interest rates on tax-exempt hospital bonds

Contents:

Author Info

  • Grossman, Michael
  • Goldman, Fred
  • Nesbitt, Susan W.
  • Mobilia, Pamela

Abstract

The aim of this paper is to examine the determinants of interests rates on tax-exempt hospital bonds. The results highlight the potential and actual roles of Federal and state policy in the determination of these rates. The shift to a Prospective Payment System under Medicare has subsidized the borrowing costs of some hospitals at the expense of others. The selection of underwriters by negotiation rather than by competitive bidding results in higher interest rates. It is cheaper for hospitals in states with relatively high income tax rates to issue debt. The Federal tax act of 1986 raised the cost of hospital debt by encouraging bond issues to contain call features. Are the interest rate effects associated with these policies desirable or undesirable? This question can not be answered in the absence of estimates of the optimal subsidy that an average hospital should receive via its participation in tax-exempt markets, how this subsidy should vary among hospitals with different characteristics, and how the welfare costs associated with this subsidy can be minimized. Our results do not contain these estimates but they underscore that the differentials at issue are substantial.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V8K-458XPDX-1H/2/48839581192be6c89d94a406302c1128
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 12 (1993)
Issue (Month): 4 (December)
Pages: 385-410

as in new window
Handle: RePEc:eee:jhecon:v:12:y:1993:i:4:p:385-410

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505560

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Thorpe, Kenneth E. & Phelps, Charles E., 1990. "Regulatory intensity and hospital cost growth," Journal of Health Economics, Elsevier, vol. 9(2), pages 143-166, September.
  2. Tanner, J Ernest, 1975. "The Determinants of Interest Cost on New Municipal Bonds: A Reevaluation," The Journal of Business, University of Chicago Press, vol. 48(1), pages 74-80, January.
  3. Richard G. Frank & David S. Salkever & Jean Mitchell, 1989. "Market Forces and the Public Good: Competition Among Hospitals and Provision of Indigent Care," NBER Working Papers 3136, National Bureau of Economic Research, Inc.
  4. Hendershott, Patric H & Kidwell, David S, 1978. "The Impact of Relative Security Supplies: A Test with Data from a Regional Tax-Exempt Bond Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(3), pages 337-47, August.
  5. Sloan, Frank A. & Valvona, Joseph & Hassan, Mahmud & Morrisey, Michael A., 1988. "Cost of capital to the hospital sector," Journal of Health Economics, Elsevier, vol. 7(1), pages 25-45, March.
  6. Wedig, Gerard, et al, 1988. " Capital Structure, Ownership, and Capital Payment Policy: The Case of Hospitals," Journal of Finance, American Finance Association, vol. 43(1), pages 21-40, March.
  7. Wedig, Gerard J & Hassan, Mahmud & Sloan, Frank A, 1989. "Hospital Investment Decisions and the Cost of Capital," The Journal of Business, University of Chicago Press, vol. 62(4), pages 517-37, October.
  8. Liu, Pu & Moore, William T, 1987. "The Impact of Split Bond Ratings on Risk Premia," The Financial Review, Eastern Finance Association, vol. 22(1), pages 71-85, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361.
  2. Mahmud Hassan & Gerard Wedig & Michael Morrisey, 2000. "Charity Care by Non-profit Hospitals: The Price of Tax-exempt Debt," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(1), pages 47-62.
  3. Patrick Bernet & Thomas Getzen, 2008. "Can a violation of investor trust lead to financial contagion in the market for tax-exempt hospital bonds?," International Journal of Health Care Finance and Economics, Springer, vol. 8(1), pages 27-51, March.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:12:y:1993:i:4:p:385-410. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.