The Availability and Use of Capital by CAHs (Briefing Paper #4)

Publication Date: Mar 2005
Author(s): Gregg W
Research Center(s): Minnesota
Topic(s): Finance
Notes: Briefing Paper #4

This study examines the experiences of Critical Access Hospitals (CAHs) in meeting their capital needs. It focuses specifically on their efforts to obtain capital, the capital sources tapped through these efforts, how CAHs have used the capital they have been able to obtain over the past few years, and assesses their current capital needs. Information on these and other capital-related issues were obtained through two surveys conducted in 2004 that cover a three-year period between 2001 and 2004. A national telephone survey was used to obtain information about these experiences from CAH administrators while an e-mail survey collected information on state-level capital issues from 44 State Flex Program Coordinators.

Study findings indicate that approximately 42 percent of all CAHs had pursued a capital loan at some point between 2001 and 2004. Almost all loan efforts (88%) were successful resulting in the acquisition of more than $400 million to support approximately 227 CAH related capital projects. Financial performance and general profitability continue to be the most important factors in accessing capital resources. The vast majority of the projects targeted the replacement, repair and updating of physical plant space and hospital equipment. The magnitude of the capital involved coupled with the level of success in obtaining that capital suggest that CAH administrators are well aware of loan market criteria and are able to mobilize the effort and credibility needed to achieve their financial goals. It appears that lenders are becoming more comfortable about Flex Program participants, their cost-based reimbursement, and their likelihood of continued financial improvement over the period of a loan contract.

Download