Cost of capital to the hospital sector.

Loading...
Thumbnail Image

Date

1988-03

Journal Title

Journal ISSN

Volume Title

Repository Usage Stats

443
views
1640
downloads

Abstract

This paper provides estimates of the cost of equity and debt capital to for-profit and non-profit hospitals in the U.S. for the years 1972-83. The cost of equity is estimated using, alternatively, the Capital Asset Pricing Model and Arbitrage Pricing Theory. We find that the cost of equity capital, using either model, substantially exceeded anticipated inflation. The cost of debt capital was much lower. Accounting for the corporate tax shield on debt and capital paybacks by cost-based insurers lowered the net cost of capital to hospitals.

Department

Description

Provenance

Citation

Scholars@Duke

Sloan

Frank A. Sloan

J. Alexander McMahon Distinguished Professor Emeritus of Health Policy and Management

Professor Sloan is interested in studying the subjects of health policy and the economics of aging, hospitals, health, pharmaceuticals, and substance abuse. He has received funding from numerous research grants that he earned for studies of which he was the principal investigator. His most recent grants were awarded by the Robert Wood Johnson Foundation, the Center for Disease Control, the Pew Charitable Trust, and the National Institute on Aging. Titles of his projects include, “Why Mature Smokers Do Not Quit,” “Legal and Economic Vulnerabilities of the Master Settlement Agreement,” “Determinants and Cost of Alcohol Abuse Among the Elderly and Near-elderly,” and “Reinsurance Markets and Public Policy.” He received the Investigator Award for his work on the project, “Reoccurring Crises in Medical Malpractice.” Some of his earlier works include the studies entitled, “Policies to Attract Nurses to Underserved Areas,” “The Impact of National Economic Conditions on the Health Care of the Poor-Access,” and “Analysis of Physician Price and Output Decisions.” Professor Sloan’s latest research continues to investigate the trends and repercussions of medical malpractice, physician behavior, and hospital behavior.


Unless otherwise indicated, scholarly articles published by Duke faculty members are made available here with a CC-BY-NC (Creative Commons Attribution Non-Commercial) license, as enabled by the Duke Open Access Policy. If you wish to use the materials in ways not already permitted under CC-BY-NC, please consult the copyright owner. Other materials are made available here through the author’s grant of a non-exclusive license to make their work openly accessible.