This is a proposal to study healthcare financing agencies -- the agencies responsible for issuing tax-exempt bonds on behalf of healthcare institutions. The objectives are to (1) provide an inventory and profile of healthcare financing agencies, nationally -- their activities and their financing methods and how these have changed over time (1980-1991); and (2) estimate the impact of financing agency characteristics (as developed in the first objective) on hospitals' capital costs. In particular, low cost issuing agencies and the agency and issuing features/techniques which distinguish them from their higher cost counterparts will be identified. The units of observation in the empirical analysis pertain to approximately 5,000 new hospital bond financings (whose proceeds are used to invest in fixed assets or physical capital) and refinancings for the period from 1980 through 1991. The main sources of information for the project are the database on new issues of municipal securities (new financings and refinancings) maintained by Securities Data Company (SDC) and a mail survey of the financing agencies. In certain cases information on issue characteristics provided by SDC will be supplemented with similar information from the database on new issues of municipal securities maintained by IDD Information Services. Multivariate regression analyses of the determinants of interest rate on tax-exempt hospital bonds will be conducted with a focus on two hypotheses: (1) the greater the """"""""competition"""""""" involved in bond issues, the-lower the cost of capital, and (2) the greater. the """"""""experience"""""""" of the financing agency, the lower the cost of capital. Impacts of competition will be assessed by comparing interest costs in states where multiple agencies compete for the right to issue a hospital's bonds to interest costs in states where there is a single issuing agency, in effect a state-wide monopoly. Competition and experience effects will be quantified with such measures as the total number of financing agencies in a state; restrictions imposed by agencies on the selection of underwriters as indicated by whether the financing agency dictates the selection of the lead underwriter and if not the number of lead underwriters on the agency's approved list; the total number of financings by an agency undertaken in the past; and the total number of upgrades, downgrades, and defaults among an agency's financings.
