Improving financial performance: a study of 50 hospitals

This article provides an analysis of key differences between a small sample of high-performing and low-performing hospitals where performance was defined as return on equity. Some of the more significant findings were: (1) high-performing hospitals achieve their superior performance through cost control rather than higher prices; (2) high-performing hospitals minimize their investment in plant assets and accounts receivable. They are also likely to have a newer plant than low-performing hospitals; (3) high-performing hospitals are not afraid to use debt in their capital structure, but they use significantly less debt than low-performing hospitals; (4) high-performing hospitals have set aside greater reserves for future plant replacement, which helps them to keep their level of debt reasonable and generates significant amounts of investment income; and (5) high-performing hospitals have greater market share than low-performing hospitals.