hospital revenue bond

Hospital revenue bond

A bond issued to finance construction of a hospital by a municipal or state agency.

Hospital Revenue Bond

A municipal bond used to construct or expand a hospital. The bond is secured by the revenue the hospital receives in the course of its operations; that is, the issuing municipality does not back the bond itself. Generally speaking, a hospital revenue bond is riskier than other municipal bonds because hospitals have no power to tax and many carry an unusual amount of bad debt as a result of patients being unable to pay for services.

hospital revenue bond

Tax-exempt debt issued by a city, county, state, or hospital authority with debt service guaranteed by hospital revenues. While the facility that the bond issue is used to finance may be leased or sold to the hospital, it is the financial strength of the hospital, not the issuer, that backs the debt. Hospital bonds are generally more risky than general obligation or water and sewer bonds because the hospital has no taxing power. See also 501(c)(3) bond.
Are hospital revenue bonds so risky that my portfolio and I will land in traction?

Before you buy a hospital revenue bond, you need to review carefully the financial and demographic characteristics of the issuing hospital and have some understanding of how it might be influenced by competition from other health care providers in its market. Although many hospitals represent reasonable credit risks, they are certainly not all alike, and the group should not be painted with a broad brush in the same manner that municipal bond investors sometimes paint other types of bonds (such as water and sewer revenue bonds or school district bonds). Many hospitals are struggling as a result of numerous factors, several of which are overbuilding of capacity relative to community needs, tightening reimbursement policies on the part of Medicare and other insurers, rising costs as hospitals are forced to update equipment to keep up with leaps in health care technology, and growing competition, including that from nonmedical facilities. Of course, these industry problems have been compounded by cuts in federal aid to states and municipalities. Although these problems are greater for the nonprofit hospitals, the for-profit hospitals are clearly not immune to them. In reviewing a hospital to determine its relative creditworthiness, financial analysts focus on institutional characteristics and market position, management factors, medical staff characteristics, financial indicators, and legal covenants. Because of the greater risks often associated with hospital revenue bonds, most bonds of this type are issued with some kind of credit enhancement, usually in the form of insurance, but sometimes via letter-of-credit facilities.

Stephanie G. Bigwood, CFP, ChFC, CSA, Assistant Vice President, Lombard Securities, Incorporated, Baltimore, MD
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References in periodicals archive ?
Fitch has also affirmed the 'BB+' rating for the following County of Christian, Kentucky, hospital revenue bonds issued on behalf of Jennie Stuart Medical Center (JSMC):
7 June 2010 - S&P on Friday downgraded to D (default) from C its long-term rating on Valley Health System (VHS), California's series 1993 certificates of participation (COPs) and series 1996A hospital revenue bonds.
31 that it will no longer rate the Arkansas Development Finance Authority's $7.4 million hospital revenue bonds on Washington Regional Medical Center.
The Board approved a bond issue of up to $54.725 million in 23-year fixed-rate tax-exempt bonds to execute a current refunding of the New York State Medical Care Facilities Finance Agency Secured Hospital Revenue Bonds, 1994 Series A, which were issued on behalf of the Community General Hospital of Sullivan County, now the Catskill Regional Medical Center.
"Factors Affecting Credit Rating Downgrades of Hospital Revenue Bonds," Inquiry, 27, 1990, pp.
During December 1984, The Methodist Hospital issued Hospital Revenue Bonds, Series 1984 in the principal amount of $196,900,000.
Even within municipals, perceptions of different risk levels exist (e.g., typical 'A' rated hospital revenue bonds are perceived as having greater risk than a typical county's 'A' rated GO bonds).
These are as follows:--$70 million hospital revenue bonds series 2010; and --$34 million hospital revenue refunding bonds series 2009.
Clair Memorial Hospital: --$84.250 million hospital revenue bonds, series 2018.
-- $183 million Harris County Cultural Education Facilities Finance Corp.'s hospital revenue bonds, series 2015-1;
Securities and Exchange Commission, assigned Boone Hospital Center (BHC) an IDR of 'A-' and has downgraded approximately $79.4 million of hospital revenue bonds issued by Boone County, MO on behalf of BHC to 'A-' from 'A'.

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