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Assessing the characteristics of hospital bond defaults
1Virginia Commonwealth University, Department of Health Administration, Richmond 23298-0203, USA.
Objectives:
The authors identify market, operational, and financial characteristics associated with the default of hospital revenue bonds using logistic regression analysis.
Methods:
Data from 22 defaulted hospitals and 260 nondefaulted hospitals from 1988 to 1992 are analyzed.
Results:
Findings indicated that defaulted hospitals had smaller market shares, were located in near-urban markets, and incurred higher expenses per discharge than nondefaulted hospitals. Defaulted hospitals also were highly leveraged and had lower debt service coverage ratios compared with nondefaulted hospitals.
Conclusions:
Results suggest that market share, ability to generate sufficient case flow to meet debt service, and amount of debt on hand are critical factors in avoiding a bond default but not government payer mix.