Rural Hospitals' Access to Capital
There is a concern that rural hospitals have difficulty obtaining loans to update their aging buildings and equipment. Medicare cost report data show that rural hospitals tend to have lower levels of debt and slightly older facilities than urban hospitals. The purpose of this project is to examine why rural hospitals borrow less and have older facilities. For example, rural hospitals may lack access to capital and/or choose to borrow less due to an inability to earn a reasonable return on capital improvements. To analyze the adequacy of capital markets, we will examine both private capital markets and existing government loan programs. This will be the first study to take an integrated approach to examining federal loan programs, state loan programs, grant programs, hospital system funding of capital needs, and the rate of return on rural capital investments. Secondary data sources that will be used include Medicare cost reports and AHA annual survey data. Primary data sources include surveys of state hospital associations and Departments of Health and structured interviews with representatives of public and private sector lenders.
This project is completed.
Publications
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Rate of Return on Capital Investments at Small Rural Hospitals
Author(s): Jeffrey Stensland, Astrid Knott, Ira Moscovice, Gestur Davidson
Report Number: Working Paper No. 45
Date: 01 / 2003
Examines whether the aging of rural facilities, a major problem among rural hospitals, is due to a lower rate of return on capital investment at these hospitals. This paper also investigates whether membership in a hospital system improves access to capital and results in the updating of buildings and equipment. The study found that hospitals generally do no use system membership to overcome access to capital problems, most likely because investments are not readily available along this pathway. The study also found that hospitals generate 50 cents for every dollar invested in facility improvement. Although this is a way to generate revenue, the small hospitals will typically not be able to recover the costs spent in the improvement. These findings suggest that small hospitals, particularly the smallest and most rural hospitals, would need grants in order to adequately cover the costs of facility improvement.
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Rural Hospital Access to Capital: Issues and Recommendations
Author(s): Walter Gregg, Astrid Knott, Ira Moscovice
Report Number: Working Paper No. 41
Date: 07 / 2002
Identifies federal and state programs that have assisted or could assist rural hospitals in meeting their capital needs; assesses whether rural hospital borrowers have difficulty in meeting their capital needs under existing grant, loan, and mortgage insurance programs; and discusses potential options for improving access to capital for rural hospitals. Offers regulatory, programmatic, and policy recommendations to improve the HUD 242 Program and the USDA Community Facilities Program-two federal programs that have been able to assist some of the less creditworthy hospitals over the last three decades.
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