The Role of Organizational Slack in Buffering Financially Distressed Hospitals from Market Exits

Puro, Neeraj; Borkowski, Nancy; Feyereisen, Scott; Hearld, Larry R.; Carroll, Nathaniel; Byrd, James D.; Smith, Dean G.; Ghiasi, Akbar

doi:10.1097/jhm-d-20-00004

Cited by 8 publications

(10 citation statements)

References 27 publications

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“…Previous studies have mostly focused on public hospitals or non-profit hospitals in developed countries such as the US and the UK ( 52 – 54 ), which have large differences in hospital operations from China. Public hospitals are the major part of China's medical service system and are government-led organizations that embody public welfare, undertake basic medical care, and relieve people's difficulties in accessing medical care.…”

Section: Discussionmentioning

confidence: 99%

How slack resource affects hospital financial performance: The evidence from public hospitals in Beijing

Chen

Song²,

Zhu³

2022

Front. Public Health

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BackgroundBeijing is a city with high concentration and congestion of quality medical resources in China. While moderate slack seems to be beneficial to the improvement of medical quality. The actual relationship between hospital slack resources and their performance deserves further exploration. The study aims to analyze the slack resources of public hospitals in Beijing and investigate the relationship between slack and hospital financial performance. Finding a reasonable range of slack to optimize resource allocation.MethodsThe panel data of 22 public hospitals in Beijing from 2005 to 2011 were selected as the sample, and the DEA model was applied to measure the main variable using DEAP 2.1. Descriptive statistical analysis was performed using Excel and STATA 15. Pearson correlation coefficient analysis and variance inflation factor test were performed for each variable to avoid multicollinearity. The HAUSMAN test was used to determine the appropriate panel regression model, and then to analyze the influence relationship between the variables.ResultsFrom 2005 to 2011, hospital slack resource transitioned from high to low. The slack measured by the DEA model has an inverted U-shaped relationship with financial performance, with ROA increasing from 4.088 to 8.083 when slack increases from 0 to about 0.378, and then showing a decreasing trend; slack measured by financial indicators has a transposed S-shaped relationship with financial performance, with ROA increasing when slack increase from 3.772 to 5.933.ConclusionsThe slack resources of Beijing public hospitals decreased year by year from 2005 to 2011. Moderate slack resources are conducive to the improvement of healthcare quality, but when slack resources increase to a certain level, it will have a negative impact on healthcare quality. Therefore, hospital managers should control the slack within a moderate range according to the hospital operation policy and development plan to obtain the best performance.

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Section: Discussionmentioning

confidence: 99%

How slack resource affects hospital financial performance: The evidence from public hospitals in Beijing

Chen

Song²,

Zhu³

2022

Front. Public Health

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“…(See Supplemental Digital Content eMethods, available at http://links.lww.com/JHM/A83). Although the Altman z -score has historically been used to predict the risk of bankruptcy for corporations and manufacturers, it also has been used to predict hospital bankruptcy (Altman et al, 1977; Puro et al, 2019). Similar to previous literature, hospital distress was defined as an Altman z -score below 1.80 (Langabeer et al, 2018; Puro et al, 2019).…”

Section: Methodsmentioning

confidence: 99%

Association of Measured Quality and Future Financial Performance Among Hospitals Performing Cardiac Surgery

Enumah¹,

Sundt²,

Chang³

2022

Journal of Healthcare Management

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Goal: For decades, hospitals performing cardiac surgery have carried the cost of implementing quality improvement activities and reporting quality outcomes. However, the financial return of such investments is unclear, which weakens the incentive for hospitals to invest in quality improvement activities. This study explored the relationship between a hospital's measured quality and its financial performance.Methods: Using data from the American Hospital Association and Hospital Compare from 2014 to 2018, we performed an observational study of hospitals performing cardiac surgery. We used mixed-effects regression models with fixed-year effects and random intercepts to explore associations between measured quality and hospital financial performance. Our dependent variables were margins (profit divided by revenue) and financial distress; our independent variables included Patient Safety Indicator 90 (PSI-90) and hospital characteristics.

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“…Positive views of slack include that it can protect the work environment against environmental threats as well as attract and retain employees. 19 20 Slack has also been suggested to contribute to innovation. 21 Negative views slack as a sign of waste and inefficiency, which reflects irrational and inefficient resource allocation.…”

Section: Introductionmentioning

confidence: 99%

“…Currently, scholars have different opinions on the role of slack resources. Positive views of slack include that it can protect the work environment against environmental threats as well as attract and retain employees 19 20. Slack has also been suggested to contribute to innovation 21.…”

Section: Introductionmentioning

confidence: 99%

Impact of slack resources on healthcare costs in tertiary and secondary hospitals: a panel data study of public hospitals in Beijing from 2015 to 2019

Chen¹,

Song²,

Zhu³

2023

BMJ Open

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ObjectiveThis study aims to explore the relationship between slack resources and cost consumption index in tertiary and secondary hospitals and to provide targeted healthcare resource utilisation recommendations for tertiary and secondary hospital managers.DesignThis is a panel data study of 51 public hospitals in Beijing from 2015 to 2019.SettingTertiary and secondary public hospitals in Beijing. Data envelope analysis was used to calculate the slack resources. Regression models were used to explore the relationship between slack resources and healthcare costs.ParticipantsA total of 255 observations were collected from 33 tertiary hospitals and 18 secondary hospitals.Outcome measuresSlack resources and healthcare costs in tertiary and secondary public hospitals in Beijing from 2015 to 2019. Linear or curve relationship between slack resources and healthcare costs in tertiary and secondary hospitals.ResultsThe cost of healthcare in tertiary hospitals has always been higher than in secondary hospitals, and the slack resources in secondary hospitals have always been worse than in tertiary hospitals. For tertiary hospitals, the cubic coefficient of slack resources is significant (β=−12.914, p<0.01) and the R2of cubic regression is increased compared with linear and quadratic regression models, so there is a transposed S-shaped relationship between slack resources and cost consumption index. For secondary hospitals, only the first-order coefficient of slack resources in the linear regression was significant (β=0.179, p<0.05), so slack resources in secondary hospitals were positively related to the cost consumption index.ConclusionsThis study shows that slack resources’ impact on healthcare costs differs in tertiary and secondary public hospitals. For tertiary hospitals, slack should be kept within a reasonable range to control excessive growth in healthcare costs. In secondary hospitals, keeping too many slack resources is not ideal, so managers should adopt strategies to improve competitiveness and service transformation.

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The Role of Organizational Slack in Buffering Financially Distressed Hospitals from Market Exits

Cited by 8 publications

References 27 publications

How slack resource affects hospital financial performance: The evidence from public hospitals in Beijing

How slack resource affects hospital financial performance: The evidence from public hospitals in Beijing

Association of Measured Quality and Future Financial Performance Among Hospitals Performing Cardiac Surgery

Impact of slack resources on healthcare costs in tertiary and secondary hospitals: a panel data study of public hospitals in Beijing from 2015 to 2019

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