The general aim of this research is to provide an analysis of the acute care hospital's participation in tax-exempt debt markets. Tax-exempt financing is the overwhelming method of hospitals' capital financing. It accounts for about 70 cents of every dollar of capital invested by the hospital industry. We cannot build on a prior literature since, to our knowledge, there has been no analytical study of the market for tax-exempt hospital financing.
Our specific aims are (1) to provide a descriptive analysis of the market for hospital bond financings including the characteristics of this market and their changes over time, (2) to estimate the determinants of hospital bonds' interest rates and (3) to examine the determinants of hospitals' demand for funds provided by the bond market with a focus on the effects of interest rates, tax laws, reimbursement methods, and state regulations. A unique data base will be constructed and employed in this research. It will pertain to all new hospital bond financings and refinancings from January 1, 1980 through December 31, 1987. Based on data obtained as of September 30, 1987, there have been approximately 4,000 new financings and refinancings since 1980. Information on the characteristics of the issue (including those associated with the original financing in the case of a refinancing) will be merged with characteristics of the issuer (hospital), its market area (county or a group of contiguous counties) and state of location, and national market characteristics at the time of the issue.
