Cost of capital to the hospital sector. Academic Article uri icon

abstract

  • 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 1972-83. 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.

published proceedings

  • J Health Econ

author list (cited authors)

  • Sloan, F. A., Valvona, J., Hassan, M., & Morrisey, M. A

citation count

  • 25

complete list of authors

  • Sloan, FA||Valvona, J||Hassan, M||Morrisey, MA

publication date

  • March 1988