Rate of Return on Capital Investments at Small Rural Hospitals


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.

University of Minnesota Rural Health Research Center
Jeffrey Stensland, Astrid Knott, Ira Moscovice, Gestur Davidson