IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v10y2018i2p323-d128907.html
   My bibliography  Save this article

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

Author

Listed:
  • Na-Eun Cho

    (College of Business, Hongik University, Seoul 04066, Korea)

  • KiHoon Hong

    (College of Business, Hongik University, Seoul 04066, Korea)

Abstract

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.

Suggested Citation

  • Na-Eun Cho & KiHoon Hong, 2018. "A Kitchen with too Many Cooks: Factors Associated with Hospital Profitability," Sustainability, MDPI, vol. 10(2), pages 1-14, January.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:2:p:323-:d:128907
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/10/2/323/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/10/2/323/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gary Ferrier & Michael Rosko & Vivian Valdmanis, 2006. "Analysis of uncompensated hospital care using a DEA model of output congestion," Health Care Management Science, Springer, vol. 9(2), pages 181-188, May.
    2. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    3. Wilson, Michael & Cutler, David M., 2014. "Emergency Department Profits Are Likely To Continue As The Affordable Care Act Expands Coverage," Scholarly Articles 33471113, Harvard University Department of Economics.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Matthew S. Lewis & Kevin E. Pflum, 2015. "Diagnosing Hospital System Bargaining Power in Managed Care Networks," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 243-274, February.
    6. Bernard Friedman & Neeraj Sood & Kelly Engstrom & Diane McKenzie, 2004. "New Evidence on Hospital Profitability by Payer Group and the Effects of Payer Generosity," International Journal of Health Economics and Management, Springer, vol. 4(3), pages 231-246, September.
    7. J Harris & H Ozgen & Y Ozcan, 2000. "Do mergers enhance the performance of hospital efficiency?," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(7), pages 801-811, July.
    8. Chang, Hsi-Hui, 1998. "Determinants of Hospital Efficiency: the Case of Central Government-owned Hospitals in Taiwan," Omega, Elsevier, vol. 26(2), pages 307-317, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Katarzyna Dubas-Jakóbczyk & Ewa Kocot & Anna Kozieł, 2020. "Financial Performance of Public Hospitals: A Cross-Sectional Study among Polish Providers," IJERPH, MDPI, vol. 17(7), pages 1-14, March.
    2. Katarzyna Dubas-Jakóbczyk & Anna Kozieł, 2020. "Towards Financial Sustainability of the Hospital Sector in Poland—A Post Hoc Evaluation of Policy Approaches," Sustainability, MDPI, vol. 12(12), pages 1-19, June.
    3. Germà Bel & Marc Esteve, 2018. "“Is Private Production of Hospital Services Cheaper than Public Production? A Meta-Regression of Public vs Private Costs and Efficiency for Hospitals”," IREA Working Papers 201824, University of Barcelona, Research Institute of Applied Economics, revised Oct 2018.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akkan, Can & Karadayi, Melis Almula & Ekinci, Yeliz & Ülengin, Füsun & Uray, Nimet & Karaosmanoğlu, Elif, 2020. "Efficiency analysis of emergency departments in metropolitan areas," Socio-Economic Planning Sciences, Elsevier, vol. 69(C).
    2. Hasan, Iftekhar & Lozano-Vivas, Ana, 2002. "Organizational Form and Expense Preference: Spanish Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 135-150, April.
    3. Sang Cheol Lee & Mooweon Rhee & Jongchul Yoon, 2018. "Foreign Monitoring and Audit Quality: Evidence from Korea," Sustainability, MDPI, vol. 10(9), pages 1-22, September.
    4. Shaikh, Ibrahim A. & O'Brien, Jonathan Paul & Peters, Lois, 2018. "Inside directors and the underinvestment of financial slack towards R&D-intensity in high-technology firms," Journal of Business Research, Elsevier, vol. 82(C), pages 192-201.
    5. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    6. Asmund Rygh & Gabriel R. G. Benito, 2018. "Capital Structure of Foreign Direct Investments: A Transaction Cost Analysis," Management International Review, Springer, vol. 58(3), pages 389-411, June.
    7. Ilya Ivaninskiy & Irina Ivashkovskaya & Joseph A. McCahery, 2023. "Does digitalization mitigate or intensify the principal-agent conflict in a firm?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(3), pages 695-725, September.
    8. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    9. Adi Masli & Matthew G. Sherwood & Rajendra P. Srivastava, 2018. "Attributes and Structure of an Effective Board of Directors: A Theoretical Investigation," Abacus, Accounting Foundation, University of Sydney, vol. 54(4), pages 485-523, December.
    10. Dendi Ramdani & Arjen Witteloostuijn, 2012. "The Shareholder–Manager Relationship and Its Impact on the Likelihood of Firm Bribery," Journal of Business Ethics, Springer, vol. 108(4), pages 495-507, July.
    11. Etienne Redor & Magnus Blomkvist, 2021. "Do all inside and affiliated directors hold the same value for shareholders?," Economics Bulletin, AccessEcon, vol. 41(3), pages 882-895.
    12. J. David Cummins & Mary A. Weiss & Hongmin Zi, 1998. "Organizational Form and Efficiency: An Analysis of Stock and Mutual Property-Liability Insurers," Center for Financial Institutions Working Papers 97-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
    13. Sergio Destefanis & Vania Sena, 2007. "Patterns of corporate governance and technical efficiency in Italian manufacturing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 27-40.
    14. David Hillier & Patrick McColgan, 2008. "An analysis of majority owner‐managed companies in the UK," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(4), pages 603-623, December.
    15. Martin Kyere & Marcel Ausloos, 2021. "Corporate governance and firms financial performance in the United Kingdom," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1871-1885, April.
    16. Al-Najjar, Basil & Salama, Aly, 2022. "Mind the gap: Are female directors and executives more sensitive to the environment in high-tech us firms?," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    17. Mohamed Ali Khaldi, 2016. "Mesure opérationnelle de la valeur partenariale et sa répartition," Post-Print hal-01900615, HAL.
    18. Brogi, Marina & Lagasio, Valentina, 2022. "Better safe than sorry. Bank corporate governance, risk-taking, and performance," Finance Research Letters, Elsevier, vol. 44(C).
    19. Tleubayev, Alisher & Bobojonov, Ihtiyor & Gagalyuk, Taras & Glauben, Thomas, 2020. "Board gender diversity and firm performance: Evidence from the Russian agri-food industry," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 23(1), pages 35-53.
    20. Birgitte Grøgaard & Asmund Rygh & Gabriel R. G. Benito, 2019. "Bringing corporate governance into internalization theory: State ownership and foreign entry strategies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1310-1337, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:10:y:2018:i:2:p:323-:d:128907. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.