A cross-sectional analysis of hospital profitability

This study used logit regression to discriminate between profitable and non-profitable hospitals. The specified model worked best for voluntary hospitals, and the classification results were consistently higher for profitable hospitals than for non-profitable hospitals. Only one financial variable, the operating margin, was consistently significant in each regression equation. The results challenged the "general consensus" that operating efficiency is uniform across control categories. Teaching status was found to have a significant and positive effect, but only for voluntary hospitals. Lastly, the results indicate that uncompensated care is a major concern for voluntary hospitals. These findings raise the question of whether reimbursement rates under PPS should incorporate local factors. They also indicate that hospital management style does not and will not model business operations. As such, hospital managers may be unable to dramatically change a hospital's level of profitability.