Defense Date


Document Type


Degree Name

Doctor of Philosophy


Health Administration

First Advisor

Dr. Michael J. McCue


Capital investments in the latest medical equipment and the replacement of aging facilities are important hospital decisions because they may have a significant influence on operating efficiencies and quality of care. However, hospitals experienced a minimal growth rate in capital expenditures which contributed to the aging of the hospital industry's asset base during the late 1990's and early 2000's. One of the underlying reasons behind this lack of growth might be the financial stresses that hospitals were facing after the Balanced Budget Act (BBA) of 1997, which significantly reducedMedicare reimbursement and had an adverse impact on the financial viability of hospitals. The objective of this study is to empirically evaluate how changes in market, operational and financial factors influence changes in hospital capital investment in the post BBA period.The study employs a panel of nonprofit private and public, short-term general hospitals from 1998 to 2001. Six secondary databases were merged and analyzed by first difference transformation and instrumental variable estimation to eliminate unmeasured, time-invariant hospital characteristics, and to address the endogeneity and possible feedback effects of regressors in the model.The results of the study suggest that changes in hospital capital investment appear to be positively associated with changes in the ratio of primary care physicians to all physicians in market, the size of population, and the ratio of population age 65 over to all population in market. Also significant is change in the age of plant for hospitals that exhibits a negative association with change in capital investment. As expected, the study observes a strong positive effect of changes in liquidity and cash flow on changes in capital investment. However, the effect of change in debt ratio on change in capital investment appears to be marginally significant.Estimation of the effects of changes in variety of factors on changes in hospital capital investment especially in the post-Balanced Budget Act period indicates that hospitals appear to increase their capital expenditures to accommodate the increasing market demand for hospital services, and the results also show that availability of resources, especially financial ones, are most likely to influence capital investment during the financially stressed environment.This study contributes to a limited body of research examining factors affecting capital investment at the hospital level and demonstrates the important role of internal funds in predicting future hospital capital investment.


© The Author

Is Part Of

VCU University Archives

Is Part Of

VCU Theses and Dissertations

Date of Submission