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

  • Boris Augurzky

    ()

  • Dirk Engel

    ()

  • Christoph Schwierz

    ()

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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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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  1. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  2. Nazmi Sari, 2002. "Do competition and managed care improve quality?," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 571-584.
  3. Martin Gaynor & William B. Vogt, 2003. "Competition Among Hospitals," NBER Working Papers 9471, National Bureau of Economic Research, Inc.
  4. David Easley & Maureen O'Hara, 1983. "The Economic Role of the Nonprofit Firm," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 531-538, Autumn.
  5. 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.
  6. Vita, Michael G., 1990. "Exploring hospital production relationships with flexible functional forms," Journal of Health Economics, Elsevier, vol. 9(1), pages 1-21, June.
  7. Danzon, Patricia Munch, 1982. "Hospital `profits' : The effects of reimbursement policies," Journal of Health Economics, Elsevier, vol. 1(1), pages 29-52, May.
  8. 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.
  9. Robert Connor & Roger Feldman & Bryan Dowd, 1998. "The Effects of Market Concentration and Horizontal Mergers on Hospital Costs and Prices," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 159-180.
  10. Virginia Wilcox-Gok, 2002. "The effects of for-profit status and system membership on the financial performance of hospitals," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 479-489.
  11. Town, Robert & Vistnes, Gregory, 2001. "Hospital competition in HMO networks," Journal of Health Economics, Elsevier, vol. 20(5), pages 733-753, September.
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