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Sustainability 2018, 10(2), 323; https://doi.org/10.3390/su10020323

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

College of Business, Hongik University, Seoul 04066, Korea
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Received: 4 January 2018 / Revised: 23 January 2018 / Accepted: 25 January 2018 / Published: 26 January 2018
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
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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. View Full-Text
Keywords: hospital; profitability; ownership; nonprofit hospital; profitability; ownership; nonprofit
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Cho, N.-E.; Hong, K. A Kitchen with too Many Cooks: Factors Associated with Hospital Profitability. Sustainability 2018, 10, 323.

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