Indicators of hospital closure under PPS and Blue Cross/Blue Shield cost-based reimbursements

Using an adaptation of discriminant analysis on a sample of 120 hospitals in the state of Alabama, this paper illuminates characteristics of hospitals closed due to financial failure under PPS and cost-based Blue Cross/Blue Shield reimbursement systems. The results show high debt levels, poor revenue and cost ratios, poor utilization management, and the inability to collect effectively on outstanding accounts in the year prior to hospital failure.