Profit incentives and the hospital industry: New evidence

Register, Charles A.; Sharp, Ansel M.; Stevans, Lonnie K.

doi:10.1007/bf02304059

Cited by 3 publications

(1 citation statement)

References 6 publications

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“…Thus, depending upon the type of hospital, managers may have different incentives and face different political costs, and regulatory reimbursement policies that affect financial performance and possible financial distress or closure. Some research studies provide evidence that the form of hospital ownership control is associated with differences in the real-valued 1 (i.e., financing, investing and operating) decision performance of hospital managers, which is attributed to different economic incentives placed on hospital managers (Relman, 1980;Renn et al, 1985;Forgione, 1987;Register et al, 1988;McCue & Ozcan, 1992;Forgione, Schiff & Crumbley, 1996;Roomkin & Weisbrod, 1999;Becker & Potter, 2002;Brickley & Van Horn, 2002;Leone & Van Horn, 2005). The FP hospital objective is to maximize profits and shareholder wealth, which may be achieved by providing incentives to managers through profit-sharing arrangements, stock option plans, and without the US Internal Revenue Service's (IRS) reasonablecompensation limits on management salaries (US IRS, 1969).…”

Section: Prior Literature Managerial Incentives and Political Costs In Hospitalsmentioning

confidence: 99%

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

Liu

Jervis

Younis

et al. 2011

Journal of Public Budgeting, Accounting &Amp; Financial Management

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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.

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