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Who gets the Credit? Determinants of the Probability of Default in the German Hospital Sector

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Author Info
Boris Augurzky ()
Dirk Engel ()
Christoph Schwierz ()

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Abstract

Huge underinvestment increases the need for private borrowing in the German hospital sector, the access to which is partly determined by the probability of default (PD) of individual hospitals. Using ordinary least squares and quantile regression techniques this paper provides first empirical evidence of its kind to evaluate the PD in the hospital sector and its constituent determinants. Based on annual account and medical data from 17% of all German hospitals we find that the current average probability of default amounts to approximately 1.7%, which is slightly higher than the average probability for all German firms. Among other determinants, we find that public ownership significantly increases the risk of default, while private for-profit and private not-for-profit hospitals do not differ. Moreover, demographic change in the form of population growth is confirmed to be relevant for the PD.

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Publisher Info
Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number 0054.

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Length: 21 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:rwi:dpaper:0054

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Related research
Keywords: Hospital profitability; quantile regression; probability of default; ownership type theories;

Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Martin Gaynor & William B Vogt, 2003. "Competition among Hospitals," The Centre for Market and Public Organisation 03/087, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
  2. Vita, Michael G., 1990. "Exploring hospital production relationships with flexible functional forms," Journal of Health Economics, Elsevier, vol. 9(1), pages 1-21, June. [Downloadable!] (restricted)
  3. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January. [Downloadable!] (restricted)
  4. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, vol. 18(1), pages 87-98, January. [Downloadable!] (restricted)
  5. Town, Robert & Vistnes, Gregory, 2001. "Hospital competition in HMO networks," Journal of Health Economics, Elsevier, vol. 20(5), pages 733-753, September. [Downloadable!] (restricted)
  6. Danzon, Patricia Munch, 1982. "Hospital `profits' : The effects of reimbursement policies," Journal of Health Economics, Elsevier, vol. 1(1), pages 29-52, May. [Downloadable!] (restricted)
  7. Wilcox-Gok, Virginia, 2002. "The Effects of For-Profit Status and System Membership on the Financial Performance of Hospitals," Applied Economics, Taylor and Francis Journals, vol. 34(4), pages 479-89, March. [Downloadable!] (restricted)
  8. Robert A. Connor Roger D. Feldman Bryan E. Dowd, 1998. "The Effects of Market Concentration and Horizontal Mergers on Hospital Costs and Prices," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 5(2), pages 159-180, July. [Downloadable!] (restricted)
  9. Propper, Carol & Burgess, Simon & Green, Katherine, 2004. "Does competition between hospitals improve the quality of care?: Hospital death rates and the NHS internal market," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1247-1272, July. [Downloadable!] (restricted)
  10. Nazmi Sari, 2002. "Do competition and managed care improve quality?," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 571-584. [Downloadable!]
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