DEFINITION of 'Hospital Revenue Bond'

A type of municipal bond to support the construction of new hospitals or new equipment and upgrades for existing hospitals. The revenue created by the hospitals is then used to pay back bondholders. Generally, bondholders are paid only after the expenses of running the hospital are paid, creating risk for bondholders if the hospital is not as profitable as anticipated. Income received from a hospital revenue bond may be exempt from state, local and/or federal taxation.

BREAKING DOWN 'Hospital Revenue Bond'

As their name suggests, revenue bonds are generally backed by the revenue that the specific project is able to generate. If this revenue is insufficient, municipalities have no obligation to use other funds to pay back bondholders. This means that revenue bonds typically command higher yields, since their default risk is greater than a general obligation bond. Ratings firms evaluate a revenue bond issue and assign a ranking indicating the probability that the obligation will be paid as scheduled.

RELATED TERMS
  1. Bondholder

    The owner of a government or corporate bond. Being a bondholder ...
  2. Channeling

    A commercial insurance policy which insures employees and affiliated ...
  3. Put Provision

    A condition that allows a bondholder to resell a bond back to ...
  4. Net Revenue Pledge

    A provision in a municipal bond issue that requires the issuing ...
  5. Revenue Bond

    A municipal bond supported by the revenue from a specific project, ...
  6. Bond Resolution

    1. A document used with government bonds, especially general ...
Related Articles
  1. Investing

    Hospital Frustration With Valeant Grows

    The beleaguered pharmaceutical company promised discounted drugs to hospitals and has failed to deliver.
  2. Insurance

    Investing In Healthcare Facilities

    Read on to learn about how to value heathcare sector stocks.
  3. Investing

    5 Hospital Stocks That Are Recession Proof (HCA, LPNT)

    Learn about five hospital stocks with the capacity to weather recession storms while offering steady, long-term growth opportunities.
  4. Investing

    Convertible Bonds

    A convertible bond is a bond the investor can exchange for a specific amount of company stock at a later date. It combines a bond and a call option. The bondholder can benefit if there's an increase ...
  5. Financial Advisor

    Corporate High-Yield Bonds vs. Equities

    Equities and corporate bonds often play a significant role regarding the diversification of an investor's portfolio. We put both asset classes in contrast.
  6. Insurance

    This Is Probably Going to Hurt!

    Learn about the political controversies surrounding the Patient Protection and Affordable Care Act (ACA), also known as “Obamacare.”
  7. Investing

    Consider These Municipal Bond ETFs

    Though relatively low-risk, there are still some factors to consider when taking the plunge into municipal bond ETFs.
  8. Retirement

    Medicare’s New Payment Rules: Should You Worry?

    Medicare is moving from a fee-per-service model for hip and knee replacements to one that involves bundled payments. How to protect your rights.
  9. Investing

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  10. Financial Advisor

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
RELATED FAQS
  1. Who or what is backing municipal bonds?

    Learn about the basics of municipal bonds, including the various revenue sources that are utilized to back or secure municipal ... Read Answer >>
  2. How do I use a premium put convertible?

    Holders of convertible bonds face all the pitfalls that traditional bondholders face - liquidity risk, interest rate risk ... Read Answer >>
  3. In the context of a bond, what does the principal refer to?

    Get introduced to the world of bond investing and learn what the term "principal" means in reference to a corporate or government ... Read Answer >>
  4. What are the risks of investing in a bond?

    The most well-known risk in the bond market is interest rate risk - the risk that bond prices will fall as interest rates ... Read Answer >>
  5. What are 'death spiral' convertible bonds?

    Conventional convertible bonds give the bondholder the right to exchange the bond for a certain amount of the issuer's common ... Read Answer >>
Hot Definitions
  1. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  2. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  4. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  5. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  6. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
Trading Center