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- Veronica Vecchi, Mark Hellowell, and Stefano Gatti.
- SDA Bocconi School of Management, Milan, Italy. veronica.vecchi@unibocconi.it
- Health Policy. 2013 May 1; 110 (2-3): 243-70.
AbstractThis paper is concerned with the cost-efficiency of Private Finance Initiatives (PFIs) in the delivery of hospital facilities in the UK. We outline a methodology for identifying the "fair" return on equity, based on the Weighted Average Cost of Capital (WACC) of each investor. We apply this method to assess the expected returns on a sample of 77 contracts signed between 1997 and 2011 by health care provider organisations in the UK. We show that expected returns are in general in excess of the WACC benchmarks. The findings highlight significant problems in current procurement practices and the methodologies by which bids are assessed. To minimise the financial impact of hospital investments on health care systems, a regulatory regime must ensure that expected returns are set at the "fair" rate.Copyright © 2012 Elsevier Ireland Ltd. All rights reserved.
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