Hospital profitability and capital structure: a comparative analysis.
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This article compares the financial performance of hospitals by ownership type and of five publicly traded hospital companies with other industries, using such indicators as profit margins, return on equity (ROE) and total capitalization, and debt-to-equity ratios. We also examine stock returns to investors for the five hospital companies versus other industries, as well as the relative roles of debt and equity in new financing. Investor-owned hospitals had substantially greater margins and ROE than did other hospital types. In 1982, investor-owned chain hospitals had a ROE of 26 percent, 18 points above the average for all hospitals. Stock returns on the five selected hospital companies were more than twice as large as returns on other industries between 1972 and 1983. However, after 1983, returns for these companies fell dramatically in absolute terms and relative to other industries. We also found investor-owned hospitals to be much more highly levered than their government and voluntary counterparts, and more highly levered than other industries as well. (+info)
Financial characteristics of hospitals purchased by investor-owned chains.
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This article focuses on the preacquisition financial condition of not-for-profit hospitals acquired by investor-owned hospital chains. Financial ratios are used to determine if not-for-profit hospitals acquired by investor-owned hospital systems have common financial characteristics which make them a likely target for a takeover. The results indicate that during the time period studied, investor-owned hospital systems did tend to purchase hospitals with common financial characteristics and that these characteristics provide a reasonable description of a financially distressed hospital. This finding has important consequences for our health care delivery system. (+info)
Profit incentives and the hospital industry: are we expecting too much?
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In the recent past, a great deal of faith has been placed in the idea that the performance of the hospital industry could be improved significantly by relying more heavily on profit incentives. This article considers the effect of profit incentives on hospital behavior and finds that the existence of profit incentives has not led the for-profit hospitals in the sample to behave in significantly different economic fashions than the nonprofits. (+info)
Economic regulation and hospital behavior: the effects on medical staff organization and hospital-physician relationships.
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New forms of payment, growing competition, the continued evolution of multiunit hospital systems, and associated forces are redefining the fundamental relationship between hospitals and physicians. As part of a larger theory of organizational response to the environment, the effects of these external forces on hospital-medical staff organization were examined using both cross-sectional data and data collected at two points in time. Findings suggest that regulation and competition, at least up to 1982, have had relatively little direct effect on hospital medical staff organization. Rather, changes in medical staff organization are more strongly associated with hospital case mix and with structural characteristics involving membership in a multiunit system, size, ownership, and location. The pervasive effect of case mix and the consistent effect of multiunit system involvement support the need for policymakers to give these factors particular attention in considering how hospitals and their medical staffs might respond to future regulatory and/or competitive approaches. (+info)
Pricing objectives in nonprofit hospitals.
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This article reports on a survey of 60 financial managers of nonprofit hospitals in the eastern United States relating to the importance of a number of factors which influence their pricing decisions and the pricing objectives which they pursue. Among the results uncovered by the responses: that trustees are the single most important body in the price-setting process (doctors play a relatively unimportant role); that hospital pricing goals are more related to target net revenue than profit maximizing; and that regional factors seem to play an important role in management differences. (+info)
Factors associated with variation in financial condition among voluntary hospitals.
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This article uses multiple regression analysis to identify factors which affect variations in the financial condition of voluntary hospitals in New York State. Six separate ratios are used to measure financial condition and 18 independent variables are considered. The factors affecting financial conditions were found to vary among dimensions of financial health, and different causal relationships were evident among hospitals in New York City than among those in the rest of the state. (+info)
Independent versus system-affiliated hospitals: a comparative analysis of financial performance, cost, and productivity.
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This article analyzes differences in the financial performance, cost, and productivity between system-affiliated and independent hospitals. Data for the study were obtained from the 1981 American Hospital Association (AHA) Annual Survey of Hospitals for the State of Iowa and included 94 nonstate or nonfederal short-term hospitals without long-term care units. An interpretation of the results indicated that system-affiliated hospitals are more profitable, have better access to capital markets, are more effective price setters, and experience higher costs per case which are related to longer lengths of stay and less productive use of plant and equipment in generating revenues. (+info)
A comparison of alternative medicare reimbursement policies under optimal hospital pricing.
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This paper applies and extends the use of a nonlinear hospital pricing model, recently posited in the literature by Dittman and Morey [1]. That model applied a hospital profit-maximizing behavior and studied the effects of optimal pricing of hospital ancillary services on the incidence of payment by private insurance companies and the Medicare trust fund. Here, we examine variations of the above model where both hospital profit-maximizing and profit-satisficing postures are of interest. We apply the model to three types of Medicare reimbursement policies currently in use or under legislative mandate to implement. The policies differ according to hospital size and whether cross-subsidies are allowed. We are interested in determining the effects of profit-maximizing and -satisficing behaviors of these three reimbursement policies on the levels of profits received, and on the respective implications for private payors and the Medicare trust fund. (+info)