Capital financing in prospective payment

In the era of prospective payment, arranging financing for hospital capital projects is expected to become even more complicated than under cost-based reimbursement systems. This article outlines the information needed for a bond issue in the prospective payment environment, defines the roles and duties of several external persons and organizations involved with planning a major capital financing, and provides an overview of the entire process. This article assumes for illustrative purposes that a tax-exempt bond issue is going to be used to finance a facility expansion. This method was chosen since over 70% of all major capital financing for hospitals use the tax-exempt bond as the principal vehicle for attracting the necessary debt to finance a major construction project. The tax-exempt bond issue also requires the most detail in documentation and legal provisions.