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Hospital financial condition and the quality of patient care

  • Gloria J. Bazzoli

    (Department of Health Administration, Virginia Commonwealth University, Richmond, VA, USA)

  • Hsueh-Fen Chen

    (Department of Health Administration, Virginia Commonwealth University, Richmond, VA, USA)

  • Mei Zhao

    (Health Administration Programs, College of Health, University of North Florida, Jacksonville, FL, USA)

  • Richard C. Lindrooth

    (Department of Health Administration and Policy, Medical University of South Carolina, Charleston, SC, USA)

Concerns about deficiencies in the quality of care delivered in US hospitals grew during a time period when an increasing number of hospitals were experiencing financial problems. Our study examines a six-year longitudinal database of general acute care hospitals in 11 states to assess the relationship between hospital financial condition and quality of care. We evaluate two measures of financial performance: operating margin and a broader profitability measure that encompasses both operating and non-operating sources of income. Our model specification allows for gradual adjustments in quality-enhancing activities and recognizes that current realizations of patient quality may affect future financial performance. Empirical results suggest that there is a relationship between financial performance and quality of care, but not as strong as suggested in earlier research. Overall, our results suggest that deep financial problems that go beyond the patient care side of business may be important to prompting quality problems. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1311
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 8 ()
Pages: 977-995

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Handle: RePEc:wly:hlthec:v:17:y:2008:i:8:p:977-995
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Dranove, David & Shanley, Mark & White, William D, 1993. "Price and Concentration in Hospital Markets: The Switch from Patient-Driven to Payer-Driven Competition," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 179-204, April.
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  3. Nazmi Sari, 2002. "Do competition and managed care improve quality?," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 571-584.
  4. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May.
  5. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
  6. Shen, Yu-Chu, 2003. "The effect of financial pressure on the quality of care in hospitals," Journal of Health Economics, Elsevier, vol. 22(2), pages 243-269, March.
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