A Kitchen with too Many Cooks: Factors Associated with Hospital Profitability

In this paper, we carefully investigate previous literature to extract 10 relevant factors to explain the hospital profitability and build an econometrically well-specified model of explaining hospital profitability that does not suffer from omitted variable bias. Then we provide empirical evidence...

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Bibliographic Details
Published inSustainability Vol. 10; no. 2; p. 323
Main Authors Cho, Na-Eun, Hong, KiHoon
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 26.01.2018
Subjects
Economic models
Economics
Hospitals
Objective function
Profitability
Profits
Public concern
Sustainability
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Summary:In this paper, we carefully investigate previous literature to extract 10 relevant factors to explain the hospital profitability and build an econometrically well-specified model of explaining hospital profitability that does not suffer from omitted variable bias. Then we provide empirical evidence to a common belief that the objective function of a hospital varies with the type of hospital. We identified distinct objective functions for three types of hospitals: for-profit hospitals are driven by the overarching agreed-upon goal of profit maximization for shareholders; government hospitals, which are often the insurers of last resort, are obliged to put the public interest over profit objectives; nonprofit hospitals, which are legally prohibited from distributing profits, occupy the middle ground between for-profit and government hospitals. The results of this paper suggest that the ownership type should determine the factors on which hospitals focus and hence are useful to hospital management and academic researchers.
ISSN:2071-1050
2071-1050
DOI:10.3390/su10020323