The hospital bond market and the AHERF bankruptcy

Journal of Health Care Finance

Volumn 29, Issue 4, 2003, Pages 17-28

  Carpenter, Caryl E ^a   McCue, Michael J ^b   Moon, Sun ^a  

^a WIDENER UNIVERSITY   (United States)

^b VIRGINIA COMMONWEALTH UNIVERSITY   (United States)

Author keywords

AHERF bankruptcy; Bond insurance; Hospital bonds

Indexed keywords

ARTICLE; FINANCIAL MANAGEMENT; HEALTH CARE ORGANIZATION; HEALTH CARE UTILIZATION; HOSPITAL; INSURANCE; INVESTMENT; MARKET; MONEY; RISK ASSESSMENT; TAX; TECHNOLOGY; UNITED STATES;

BANKRUPTCY; CAPITAL FINANCING; ECONOMIC COMPETITION; FINANCIAL MANAGEMENT, HOSPITAL; HEALTH CARE SECTOR; HUMANS; INSURANCE; INVESTMENTS; MULTI-INSTITUTIONAL SYSTEMS; PENNSYLVANIA; REGRESSION ANALYSIS; RISK; TAX EXEMPTION; UNITED STATES;

EID: 0037809264     PISSN: 10786767     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (36)

1. Cain Brothers, "The AHERF Bankruptcy and Its Aftermath: Implications for Managers and Trustees, Part I," Strategies in Capital Finance, 27: 1-27 (Summer 1999).
2. Moody's Investors Services, Financial Guarantors Health Care Exposure, New York: Moody's Investor Services (May 2001).
3. See supra n.1.
4. J. Lin, "Allegheny Wrangling Ends with Settlement," The Philadelphia Inquirer (February 13, 2002).
5. See supra n.2.
6. R. Cunningham, "Hospital Finance: Signs of 'Pushback' Amid Resurgent Cost Pressures," Health Affairs, 20, 2: 233-240 (2001).
7. Ibid. Id.
8. C. Rauber, "Survey: Providers Exiting Insurance," Modern Healthcare, 28, 24: 65-74 (1998).
9. See supra n.1.
10. M.C. Jaklevic, "Pricer, Less Plentiful," Modern Healthcare, 30, 21: 52-56 (2000).
11. A basis point is one-hundredth of a percent. One hundred basis points equal one percent.
12. K. Pallarito, "Investors Aren't Sold on Healthcare Bonds," Modern Healthcare, 29, 22: 36-37 (1999).
13. D.S., Kidwell, E.H. Sorensen, and J.M. Wachowicz, "Estimating the Signaling Benefits of Debt Insurance: The Case of Municipal Bonds," Journal of Financial and Quantitative Analysis, 22, 3: 299-313 (1987); R.L. Bland and C. Yu, "Municipal Bond Insurance: An Assessment of Its Effectiveness at Lowering Interest Cost," Government Finance Review, 3, 3: 23-26 (1987); see also L.P. Hsueh and P.R. Chandy, "An Examination of the Yield Spread Between Insured and Uninsured Debt," The Journal of Financial Research, 12, 3: 235-244 (1989).
14. D.S., Kidwell, E.H. Sorensen, and J.M. Wachowicz, "Estimating the Signaling Benefits of Debt Insurance: The Case of Municipal Bonds," Journal of Financial and Quantitative Analysis, 22, 3: 299-313 (1987); R.L. Bland and C. Yu, "Municipal Bond Insurance: An Assessment of Its Effectiveness at Lowering Interest Cost," Government Finance Review, 3, 3: 23-26 (1987); see also L.P. Hsueh and P.R. Chandy, "An Examination of the Yield Spread Between Insured and Uninsured Debt," The Journal of Financial Research, 12, 3: 235-244 (1989).
15. D.S., Kidwell, E.H. Sorensen, and J.M. Wachowicz, "Estimating the Signaling Benefits of Debt Insurance: The Case of Municipal Bonds," Journal of Financial and Quantitative Analysis, 22, 3: 299-313 (1987); R.L. Bland and C. Yu, "Municipal Bond Insurance: An Assessment of Its Effectiveness at Lowering Interest Cost," Government Finance Review, 3, 3: 23-26 (1987); see also L.P. Hsueh and P.R. Chandy, "An Examination of the Yield Spread Between Insured and Uninsured Debt," The Journal of Financial Research, 12, 3: 235-244 (1989).
16. C.E. Carpenter, "The Marginal Effect of Bond Insurance on Hospital, Tax-Exempt Bond Yields," Inquiry, 28, 1: 67-73 (1991); see also M.J. McCue, "Association of HMO Penetration and Other Credit Quality Factors with Tax-Exempt Bond Yields," Inquiry, 34, 3: 217-227 (1997).
17. C.E. Carpenter, "The Marginal Effect of Bond Insurance on Hospital, Tax-Exempt Bond Yields," Inquiry, 28, 1: 67-73 (1991); see also M.J. McCue, "Association of HMO Penetration and Other Credit Quality Factors with Tax-Exempt Bond Yields," Inquiry, 34, 3: 217-227 (1997).
18. Id. at C.E. Carpenter.
19. See M.J. McCue, supra n.14.
20. See R.L. Bland and C. Yu, supra n.13.
21. L.R. Burns, J. Cacciamani, J. Clement, and W. Aquino, "The Fall of the House of AHERF: The Allegheny Bankruptcy," Health Affairs, 19, 1: 7-38 (January-February 2000).
22. See supra n.2.
23. See supra ns. 1, 10, and 18.
24. Data were missing for some bonds in the sample. Usually, the missing variable was the coupon of final maturity. These bonds were not included in the final sample. To address the issue of sample bias, we compared the final sample of bonds to the sample of bonds with missing data. We found the bonds with missing data had significantly higher occupancy rates, lower operating margins, larger principal amounts, and were more likely to be issued by health systems than the bonds in the final sample. There were no significant differences between the two samples for days cash on hand, debt to equity, debt service coverage, market competition, and bond maturity.
25. Operational and financial variables for system bonds were calculated using aggregate data from all of the systems' hospitals in the numerator and denominator. Market variables were weighted by the proportion of system beds in each market.
26. See C.E. Carpenter, supra n.14; see also M.J. McCue, S.C. Renn, and G.D. Pillari, "Factors Affecting Credit Rating Downgrades of Hospital Revenue Bonds," Inquiry, 27, 3: 242-254 (1990).
27. See C.E. Carpenter, supra n.14; see also M.J. McCue, S.C. Renn, and G.D. Pillari, "Factors Affecting Credit Rating Downgrades of Hospital Revenue Bonds," Inquiry, 27, 3: 242-254 (1990).
28. C.E. Carpenter, M.J. McCue, and J.B. Hossack, "Association of Bond, Market, Operational, and Financial Factors with Multi-Hospital System Bond Issues," Journal of Health Care Finance, 28, 2: 26-34 (2001).
29. Moody's Investors Service, Moody's Rating Methodology Handbook, New York: Moody's Investors Service (November 2000).
30. MedPac, Report to the Congress: Medicare Payment Policy, Medicare/Payment Advisory Commission, Washington DC (2001).
31. See M.J. McCue, supra n.14.
32. S. Lutz and K. Pallarito, "Not-for-Profits Stash the Cash," Modern Healthcare, 25, 43: 76-78 (1995).
33. See M.J. McCue, supra n.14.
34. Ibid. Id.
35. See C.E. Carpenter, supra n.14.
36. See supra n.18.