Date of Award

4-5-1994

Document Type

Thesis

Department

Economics

First Advisor

Jeffrey S. Zax

Second Advisor

James R. Alm

Third Advisor

William Schulze

Fourth Advisor

Fred Glahe

Fifth Advisor

Frank Selto

Abstract

The purpose of this study is to investigate the impact of ownership status, organizational structure, employee benefits or incentive systems, and size on hospital performance. Performance is measured by the following indicators: productivity of capital, productivity of labor, net income, return on equity, return on total assets, patient cost per day and per stay, and patient revenue per day and per stay. These issues are important because of the growth of the health care sector and the increasing amount of money spent on the sector. Also, from a public finance viewpoint, analysis of this issue will help to determine how much the government should spend on public or not-for-profit hospitals and how to improve their productivity.

A panel data set on hospitals in the State of Arizona provide the sample for this research. The research methodology of the study consists of two techniques. First, univariate analysis is used to compare the performance of the two groups of hospitals for-profit and not-for-profit. Second, the fixed effect regression model is applied to the Arizona data to test the study's hypotheses. These analyses offer empirical evidence about the different factors influencing hospital performance. The empirical results of the study provide significant support to the study's hypotheses. First, the results suggest that there is no statistically significant difference between for-profit (FP) and not-for profit (NFP) hospitals in regard the following performance measures: productivity of capital, productivity of labor, return on equity, and net income, but there are significant performance differences in regard to return on total assets, patient cost per stay and per day, and patient revenue per stay and per day. Second, employee benefits have a significant impact on performance in terms of productivity of labor, net income, and patient cost per stay and per day. Third, organizational structure, measured by the ratio of administrative expenses to operating expenses, has a significant impact on most of the performance measures that were used in the study. Fourth, the impact of hospital size on performance is mixed. Large hospitals achieved higher rates of return on equity, and lower rates of patient cost per stay and per day. Small hospitals achieved higher rates of productivity of capital, return on total assets, and patient revenue per stay and per day.

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