Multihospital systems in the '80s--the new shape of the health care industry

Considering the major challenges that face hospitals during the 1980s--reimbursement shortfalls, capital acquisition, replacement of obsolete facilities, and more--it seems most likely that investor-owned and not-for-profit multihospital systems will begin to replace freestanding hospitals as the dominant organizational form in the health care industry.

Strategies for surviving the capital shortage

With traditional sources of capital threatened, hospitals are going to have to turn to new sources of capital and new methods of raising capital if they are to meet their facilities and equipment needs during the 1980s. New capital will come primarily from two sources: net income from new health services and health-related ventures operating in less regulated markets, and equity offerings.

New tax law hobbles tax-exempt hospitals

The Economic Recovery Tax Act of 1981 left tax-exempt hospitals at a significant disadvantage in the competition for capital. Although the new law's accelerated depreciation schedules and liberalized investment tax credits contain some marginal benefits for tax-exempt hospitals, these benefits are probably more than offset by the impact of the law on charitable giving.

Private and public initiatives in health maintenance organizations

Public policy controversies about the cost-containing potential of HMOs and the failures of many plans should not overshadow the fact that HMOs will be forces in the health care sector in the 1980s, largely as the result of increasing private investment. There is a large, stable segment of the prepaid industry that developed as a result of private sector and community concern long before the federal HMO Act of 1973, and it is their initiatives along with increasing investment activity by insurance companies and management companies in particular, that will serve as a base for consolidation and growth of HMO plans. HMOs have not proved to be the miraculous cost-containing mechanism of the future, but their impact will be felt even more for the changes they stimulate in the customary organizational forms, in financing, and in the role of business in health care.

Capital financing in an uncertain future

A critical test of the hospital's ability to survive will be its ability to raise capital in private debt markets as traditional funding sources (philanthropy and government) continue to shrink. This article assesses the impact of inflation and recession on hospital capital financing and investment, describes what a commercial banker looks for in evaluating a hospital's ability to borrow, and suggests a role for trustees in meeting the hospital's capital needs.