Implications of the method of capital cost payment on the weighted average cost of capital

The author develops a theoretical and mathematical model, based on published financial management literature, to describe the cost of capital structure for health care delivery entities. This model is then used to generate the implications of changing the capital cost reimbursement mechanism from a...

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Bibliographic Details
Published in:Health services research 1986-06, Vol.21 (2 Pt 1), p.189-212
Main Author: Boles, K E
Format: Article
Language:English
Subjects:
Capital
Capital costs
Capital Financing - economics
Capital structure
cost accounting
Finance
Financial management
Financial Management - economics
Financial planning
Health care costs
Health care delivery
Health facilities
Health Facilities - economics
Investments
Mathematics
Medical care, Cost of
Medicare - economics
Models, Theoretical
Prospective Payment System - economics
Reimbursement
Statistical analysis
United States
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Summary:The author develops a theoretical and mathematical model, based on published financial management literature, to describe the cost of capital structure for health care delivery entities. This model is then used to generate the implications of changing the capital cost reimbursement mechanism from a cost basis to a prospective basis. The implications are that the cost of capital is increased substantially, the use of debt must be restricted, interest rates for borrowed funds will increase, and, initially, firms utilizing debt efficiently under cost-basis reimbursement will be restricted to the generation of funds from equity only under a prospective system.
ISSN:0017-9124
1475-6773