Hospital financial distress, recovery and closure: Managerial incentives and political costs

The purpose of this study is to examine the association of managerial incentives and political costs with hospital financial distress, recovery or closure. The Medicare Payment Advisory Commission has stated that hospital closures are important for evaluating the distribution of cost, quality and ac...

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Bibliographic Details
Published in:Journal of public budgeting, accounting & financial management accounting & financial management, 2011, Vol.23 (1), p.31-68
Main Authors: Liu, Li-Lin (Sunny), Jervis, Kathryn J, Younis, Mustafa (Mike) Z, Forgione, Dana A
Format: Article
Language:English
Subjects:
Accounting
Assets
Budget
Business closings
Compensation plans
Corporations, Nonprofit
Correlation analysis
Cost
Debt restructuring
Financial performance
Financial planning
Health care access
Health care policy
Health policy
Hospital administration
Hospital costs
Hospitals
Hypotheses
Incentives
Management decisions
Managers
Medicaid program
Medicare
Nonprofit hospitals
Nonprofit organizations
Patients
Payment
Politics
Profitability
Profits
Public debts
Reimbursement
Stockholders
Studies
United States
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Summary:The purpose of this study is to examine the association of managerial incentives and political costs with hospital financial distress, recovery or closure. The Medicare Payment Advisory Commission has stated that hospital closures are important for evaluating the distribution of cost, quality and access to healthcare throughout the US. Using Logistic regression, we demonstrate that hospital closure is associated with low occupancy, return on investment, asset turnover, and lack of affiliation with a multihospital system. It is also significantly associated with urban location, teaching programs, high Medicare and Medicaid patient populations, and high debt. Essential access nonprofit hospitals are less likely to close, while this does not affect governmental and for-profit hospitals. Our research hypotheses are supported by these results.
ISSN:1096-3367
1945-1814
DOI:10.1108/JPBAFM-23-01-2011-B002