Thursday, January 24, 2019

What Are Hospital Revenue Bonds?


The holder of an MBA from UT Texas, Janet Andersen has over 25 years of experience in healthcare finance. Having spent the bulk of her professional career in Texas, Gladewater resident Janet Andersen has accumulated in-depth knowledge about hospital revenue bonds

Hospital revenue bonds are a type of municipal bond issued to raise money from third party investors for the construction of hospitals and other related facilities. They can also be issued to support hospital reconstructions or facility upgrades. While the bonds are backed by hospital revenues, bondholders only receive payments after hospitals are done paying their expenses. This makes hospital bonds risky since there is no guarantee the hospital will be profitable. Also, unlike municipal bonds where local governments can introduce taxes to raise money for debt repayments, hospitals cannot tax patients when their revenue falls short. 

Despite their high risk, hospital revenue bonds do have their upsides. One is that they have high yields. These high yields are usually meant to offset their high default risks. Secondly, their returns are tax exempt if issued by not-for-profit hospitals.