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

Li-Lin (Sunny) Liu (Department of Accounting, California State University-Dominguez Hills)
Kathryn J. Jervis (Department of Accounting, University of Rhode Island)
Mustafa (Mike) Z. Younis (School of Health Sciences, Jackson State University)
Dana A. Forgione (Department of Accounting, University of Texas at San Antonio)

Journal of Public Budgeting, Accounting & Financial Management

ISSN: 1096-3367

Article publication date: 1 March 2011

Abstract

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.

Citation

Liu, L.-L.(S)., Jervis, K.J., Younis, M.(M).Z. and Forgione, D.A. (2011), "Hospital financial distress, recovery and closure: Managerial incentives and political costs", Journal of Public Budgeting, Accounting & Financial Management, Vol. 23 No. 1, pp. 31-68. https://doi.org/10.1108/JPBAFM-23-01-2011-B002

Publisher

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Emerald Publishing Limited

Copyright © 2011 by PrAcademics Press