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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…
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.
We examine the association of for-profit (FP) and nonprofit (NP) economic incentives in hospice care providers with financial and nonfinancial metrics of management…
We examine the association of for-profit (FP) and nonprofit (NP) economic incentives in hospice care providers with financial and nonfinancial metrics of management performance. Controlling for quality of patient care and differences in cost-efficiency, we find that FP providers (1) selectively admit patients with longer life-prognoses and billable days and hence lower average costs per day, (2) employ a lower average cost/skill mix of workers, and (3) have higher CEO compensation and profit. The NP providers admit more patients with the less profitable life-prognoses attributes, have lower CEO compensation, and reinvest their net earnings under the non-distribution constraint. While the profit incentive may be needed to attract providers into this rapidly growing and underserved market, the NP providers return a lower cost per patient served from the taxpayer's perspective.
Problems with governance at non-profit (NP) healthcare organizations have recently led to legislative scrutiny of their audit committee practices. Using data from a survey…
Problems with governance at non-profit (NP) healthcare organizations have recently led to legislative scrutiny of their audit committee practices. Using data from a survey of chief financial officers of NP healthcare organizations and from the GuideStar database, we examine audit committee interactions with external auditors for a sample of 69 NP healthcare organizations. We find that 71% of the audit committees in our sample meet privately with the external auditor and the mean number of such meetings 1.9. Our results also suggest that audit committee interaction with the external auditor varies in response to resource dependencies, existence of debt, audit quality, audit tenure, and organizational size. These findings suggest that NP healthcare organizations respond to monitoring demands by adopting suitable audit committee related interactions.
The authors examine whether reports of internal control weaknesses (ICWs) under federal single audit (FSA) guidelines are a useful tool for evaluating non-profit (NP…
The authors examine whether reports of internal control weaknesses (ICWs) under federal single audit (FSA) guidelines are a useful tool for evaluating non-profit (NP) management, using a unique nationwide sample of NP charter schools. While prior research focuses on external stakeholder reactions to reported ICWs, little if any research addresses the utility of these reports for internal users. The authors fill this gap in the literature, finding evidence suggesting that NP charter school decision-makers use internal control (IC) reports when setting executive compensation – awarding lower pay increases when deficiencies are reported.
The authors regress executive compensation changes on reported ICWs and likely determinants of NP compensation, including organization size, growth, liquidity and management performance, using a sample of 173 school/year observations representing 113 unique schools for the years 2012–2015.
The authors find a negative relationship with executive pay increases subsequent to reports of initial and repeated IC deficiencies, indicating that lower than average pay increases are awarded subsequent to reports of ICWs.
Interpretation of the authors' results is subject to several limitations, including the possibility of omitted variable bias and the authors' sample, though it comprises all available data for the sample period, and is relatively small and may be considered exploratory in nature. Further, charter schools represent a unique public/private partnership in the educational sector, and the results may not be generalizable to other NPs. Future research could explore the relationship between reported IC deficiencies and governance in other, broader NP sectors.
The authors' findings are useful to NP organization boards of directors as they consider what factors to evaluate in their chief executive officer (CEO) compensation decisions. In addition to other criteria, inclusion of IC effectiveness in the CEO reward system is prudent, especially in today's environment of increasingly important information security and IC matters. The results suggest such information is being included. This previously undocumented use is also of particular value to regulators when weighing the costs and benefits of mandating single audits for smaller NPs, who are otherwise unlikely to obtain information on the organization's IC environment.
These findings may help inform the debate regarding NP charter schools, a fast-growing, economically significant and highly controversial sector in public education. Charters are predominantly funded by state and local taxes. As such, the quality of governance in NP charter schools is of interest to a wide range of stakeholders including parents, regulators and the public at large.
While prior research on ICWs and NPs focuses on external stakeholder reactions to reported ICWs, little if any research addresses the utility of these reports for internal users, especially in relatively smaller organizations. The research leverages the existence of charter schools, which are independent but present nationwide, providing a suitable sample of like organizations. Further, no extant research to the authors' knowledge examines the relationship of NP executive compensation and reported ICWs – a topic previously addressed in the for-profit (FP) literature.
Non-profit organizations constitute an important share of the U.S. economy, and recent audit failures and GAO findings highlight the importance of auditor reporting…
Non-profit organizations constitute an important share of the U.S. economy, and recent audit failures and GAO findings highlight the importance of auditor reporting decisions in this sector. In this study, we examine going-concern modified audit opinions for non-profit organizations. Using audit opinion data for 3,567 non-profits exhibiting some signs of financial stress, we find that non-profits are more likely to receive a goingconcern modified opinion if they are smaller, are in worse financial condition, expend less on program-related activities, and have more internal control related audit findings. Our analysis of the subsequent resolution of the going-concern uncertainties suggest that only 27 percent of the non-profits receiving an initial going-concern modified audit opinion filed for dissolution in the subsequent four fiscal years. Our findings fill a gap in an important area that has received little research attention, and provide a useful benchmark for non-profits and their auditors.
The purpose of this paper is to analyze the market for audit services for publicly traded companies operating in the US for-profit (FP) healthcare sector. Complex national…
The purpose of this paper is to analyze the market for audit services for publicly traded companies operating in the US for-profit (FP) healthcare sector. Complex national and local healthcare laws and regulations suggest the importance of assessing fee effects of joint nationallevel and city-specific expertise among auditors. Using cross-sectional OLS regression analysis, we find that joint expertise significantly affects audit pricing in the healthcare sector. We find a fee premium of 33.6 percent on engagements where auditors are both national and city-specific specialists. We also find that Big-4 auditor reputation is significantly priced over and above the effects of joint auditor expertise, and a significant positive association exists between audit and non-audit service fees-indicating the presence of knowledge spillover effects among healthcare company auditors.
This paper examines the association of charitable donations with quality of care proxies for nonprofit hospice providers in the United States (US). An estimated 1.45…
This paper examines the association of charitable donations with quality of care proxies for nonprofit hospice providers in the United States (US). An estimated 1.45 million patients received hospice care in the US in 2008. Medicare hospice spending exceeded $10 billion in 2007 and is expected to more than double over the next 10 years. Using Guidestar and Medicare Hospice Cost Report data, we find donations are positively associated with proxies for nurse and social worker quality of care, but not with our home-health aide quality proxy. This research adds to our understanding of charitable contributions in hospice provider organizations.
We examine earnings management in non-publicly listed companies, with a focus on for-profit (FP) hospice organizations, and extend the accounting earnings management…
We examine earnings management in non-publicly listed companies, with a focus on for-profit (FP) hospice organizations, and extend the accounting earnings management literature to the hospice industry. FP hospice organizations file Medicare cost reports that include complete financial statements not otherwise publicly available. Managers of FP hospice organizations have incentives to manage earnings to increase performancebased bonuses, meet or beat bond covenant requirements, or avoid public scrutiny. We find total accruals are significantly positively associated with profitability, debt, and size factors. However, discretionary accruals are significantly negatively associated with debt and size, but not profitability. Thus, monitoring and political cost factors appear to effectively mitigate earnings management in this industry sector.
The purpose of this paper is to investigate donor responses to discretionary accounting information consolidation. Nonprofit (NP) financial statement consolidation…
The purpose of this paper is to investigate donor responses to discretionary accounting information consolidation. Nonprofit (NP) financial statement consolidation discretion significantly impacts program ratio reporting, the primary NP performance measure. Stakeholders are misled to allocate limited resources inefficiently. While some NPs file group Internal Revenue Service (IRS) Form 990 returns with their affiliates, effectively providing consolidated statements, others choose to file independently of their affiliates.
The authors use OLS regression analysis and panel data for 5,697 NP-year observations for the period 2009-2011 retrieved from the National Center for Charitable Statistics Form 990 database.
The authors find evidence that consolidation discretion substantially impacts donor decisions. NP managers have incentive to utilize consolidation discretion to influence charitable giving.
The authors urge the IRS and the Financial Accounting Standards Board to reconsider the consolidation guidance for NP organizations, to develop performance measures beyond the widely used program ratio, and to require program ratio segment reporting to allow for better comparability among NPs irrespective of consolidation status. Further, the authors caution stakeholders to consider supporting organization transactions in their resource allocation decisions.
The authors are the first to use NP supporting organization information to investigate consolidation discretion and its impact on donor responses.
We present a legislative background and assessment of approaches to financing the US Department of Veterans Affairs (VA) healthcare services, and focus on issues related…
We present a legislative background and assessment of approaches to financing the US Department of Veterans Affairs (VA) healthcare services, and focus on issues related to beneficiaries eligible for both VA and Medicare benefits. We refer to a large, VA Medical Center (VAMC) hospital and healthcare complex as a case for comparison of financing approaches. Several legislative proposals had been made to grant the VA funding transfers from Medicare. To date, none has passed in the Congress. Our analysis shows that payments from Medicare would need to be adjusted for the specialized characteristics of VAMC patients, as well as for higher capital costs related to the federal VAMC mandate to maintain reserve capacity for national health emergencies, in order to appropriately apply Medicare payments.