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

• Rate of Return on Capital Investments at Small Rural Hospitals
  University of Minnesota Rural Health Research Center
  Date: 01/2003
  This paper examines whether the aging of rural facilities 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.
• Rural Hospital Access to Capital: Issues and Recommendations
  University of Minnesota Rural Health Research Center
  Date: 07/2002
  This paper identifies programs that have assisted/could assist rural hospitals in meeting capital needs; assesses whether rural hospital borrowers have difficulty in meeting capital needs under existing grant, loan, and mortgage insurance programs; and discusses potential options for improving access to capital for rural hospitals.