StudentShare solutions
Triangle menu

Long term debt alternatives for hospitals - Article Example

Nobody downloaded yet

Extract of sample
Long term debt alternatives for hospitals

Hospital financing has never been so easy. With lots of options to choose from and government’s encouraging policies to back upon, the financing part of the hospital has
become organized and comfortable for all the involved parties.Once the proposed hospital’s capital has been decided, the desired method of the capital funding needs to be determined. In the US hospital industry, approximately 50% of the assets are financed through equity and 50% through debt. Long term debt financing is available from at least four major sources: tax-exempt revenue bonds, Federal Housing Administration insured mortgages, public taxable bonds, and conventional mortgage financing.To obtain debt financing, hospitals must maintain a certain level of financial performance as measured by various ratios of assets to liabilities or income to expenses.The two prominent long term debt alternatives for hospital are:1. Conventional mortgage: A mortgage in which the interest rate does not change during the entire term of the loan and that is not insured or guaranteed by the government. Interest rate is the rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000, then the interest rate would be 90/1000 *100% = 9%.

90/1000 *100% = 9%.

Lenders typically require a down payment of at least 20 percent on a conventional loan,

although you can get a loan with a down payment of 3 percent or even less if you are

willing to pay private mortgage insurance (PMI).


PMI protects the lender if the owner defaults on the loan. Conventional mortgage loans

are typically fully amortizing, meaning that the regular principal and interest payment

will pay off the loan in the number of payments stipulated on the note.

Most conventional mortgages have time frames of 15-to-30 years and may be either

fixed-rate or adjustable. While most mortgages require monthly payments of principal

and interest, some lenders also offer interest-only and biweekly payment options.


2. Taxable bonds

Over the past 15 years, hospitals have invested large sums of money in physician
practices and various joint ventures with physician groups. However, these funds come
with a catch: control over whatever the hospital has invested in typically is required to
stay with the hospital. In many cases, this has created a lot of tension between the two
entities -- and this is where bond financing comes in to play.

Bonds carry lower rates of interest than bank loans and permit physicians to retain control
over their operations.

Bonds are a form of debt which has a principal amount (or par value) payable at maturity
and bears interest (the coupon rate) payable at certain intervals. Bonds are similar to
loans from a bank, except that bonds are typically longer in maturity (20 to 30 years) and
are usually sold to third-party investors. Bonds can be taxable or tax-exempt depending
on the tax status of the borrowing entity.

A not-for-profit 501(c)(3) hospital can borrow on a tax-exempt basis (which affords
lower interest rates) due to its nonprofit tax status, whereas, for-profit, private physician
groups borrow on a taxable basis.

Taxable bonds are issued by a physician group and sold to investors (by the group's
investment banker) based on the promise of the group to repay the principal of the bonds
and all interest. Since third-party investors will probably not be familiar with the
particular physician group, a commercial bank with a good credit rating serves as an
intermediary to provide a credit and liquidity guaranty to the investors. The bank then ...Show more

Summary

Hospital financing has never been so easy. With lots of options to choose from and government’s encouraging policies to back upon, the financing part of the hospital has
become organized and comfortable for all the involved parties…
Author : gkirlin
Long term debt alternatives for hospitals essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the article on your topic
"Long term debt alternatives for hospitals"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Term paper 2
In closing, the economy is brought forth as an indicator for possible changes in those theories and practices, something which all nursing students and professional nurses must learn about, in order to make the appropriate adaptations to the current state of the medical practice.
7 pages (1750 words) Article
Uses of Simulation Technology in Hospitals
Uses of Simulation Technology in Hospitals. Simulation refers to the imitation or representation of one act or a system by another. It is used in the education sector, assessment purposes, research and also health system integration which is utilized for the patients’ wellbeing.
4 pages (1000 words) Article
Long Form Journalism writing ( see instruction)
It is their way of praising God for all the generous blessings He has outpoured year-round. For them giving thanks to God is something that they must never fail to fulfill because it is their God-given duty as His chosen people. To some people, their extreme conviction and dedication in participating the church's evangelical mission, and in thanksgiving to God seemed like a big mystery.
4 pages (1000 words) Article
Caring for a patient with a long term condition
Some of the common conditions that present themselves as long term conditions include; chronic pain from cancerous states, cardiovascular diseases (hypertension and Angina), respiratory disorders, endocrinology conditions such as diabetes, Parkinson's disease, Alzheimer's disease, and arthritis; bipolar disorders, infection by viruses especially the HIV/AIDS virus, drug and alcohol dependence among other conditions.
8 pages (2000 words) Article
Evaluation of Long-Term Finance Alternatives
A huge investment is required for all the above mentioned decisions. And the other important thing that is to be noted in this context is that the benefits of all the huge investment can be noticed only in the long-term and these are irreversible decisions.
3 pages (750 words) Article
Long Form Journalism writing ( see instruction)
It is their way of praising God for all the generous blessings He has outpoured year-round. For them giving thanks to God is something that they must never fail to fulfill because
4 pages (1000 words) Article
Why does the american government have a large debt
The aim of the paper is to show the problems causing the debt in U.S. Just ten years ago it appeared as though the United States might actually be debt free. Some things happened that prevented this from occurring. One change that occurred in the United States is the taxes for the richest Americans and corporations were actually cut during the George W. Bush administration.
1 pages (250 words) Article
Write 4 pages the possible uses of simulation technology in your practice (Hospitals) with proper citations in APA format
It can also be of combined styles with live simulation involving humans or equipment and activity in a setting where the operation is real. The virtual simulation, on the other hand, involves humans and equipment but in a
4 pages (1000 words) Article
Caffeine may boost long-term memory
As mentioned in the article, an average American consumes approximately 300mg of caffeine daily from sources such as tea, coffee and other energy as well as soft drinks. Intake of caffeine at such high levels by an entire
1 pages (250 words) Article
What is the association between nursing staffing levels and adult patient falls in hospitals
Though falls for adult is a complex challenge since some are unavoidable, increased nurse staffing can reduce this and hence improve patient outcomes (“Safe Staffing” 2014, p. 32). From the research, the following recommendations are made to
1 pages (250 words) Article
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment