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Managed care and U.S. hospitals' capital costs

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  • Robert Jantzen
  • Patricia Loubeau

Abstract

This study examined the effects of managed care organizations (MCOs) on the yields paid by U.S. hospitals on newly issued debt. The analysis improved on existing studies by utilizing a two-stage method that compensated for both simultaneity and self-selection effects. A reduced form probit analysis was first used to identify the factors determining whether hospitals in a random sample of 717 issued new debt in the study period (1995 and 1996). Bond yields were then analyzed using a second stage reduced form regression, incorporating selection effects, for the subset of 58 hospitals that had issued fixed rate debt. The results demonstrated that MCOs had only a modest positive influence on hospitals' costs of capital. Of greater import were insurance status, length of stay, and teaching status, with investors demanding greater yields for bonds issued without insurance and from hospitals with either longer lengths of stay or medical residency programs. Copyright International Atlantic Economic Society 2003

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  • Robert Jantzen & Patricia Loubeau, 2003. "Managed care and U.S. hospitals' capital costs," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(3), pages 206-217, August.
    • Handle: RePEc:kap:iaecre:v:9:y:2003:i:3:p:206-217:10.1007/bf02295444
    DOI: 10.1007/BF02295444
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    1. James J. Heckman, 1977. "Sample Selection Bias As a Specification Error (with an Application to the Estimation of Labor Supply Functions)," NBER Working Papers 0172, National Bureau of Economic Research, Inc.
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