Impact of External Environmental Dimensions on Financial Performance of Major Teaching Hospitals in the U.S.

Abstract

Teaching hospitals have a unique mission to not only deliver graduate medical education but to also provide both inpatient and ambulatory care and to conduct clinical medical research; therefore, they are under constant financial pressure, and it is important to explore what types of external environmental components affect their financial performance. This study examined if there is an association between the short-term and long-term financial performance of major teaching hospitals in the United States and the external environmental dimensions, as measured by the Resource Dependence Theory. Data for 226 major teaching hospitals spanning 46 states were analyzed. The dependent variable for short-term financial performance was days cash on hand, and dependent variable for long-term financial performance was return on assets, both an average of most recently available 4-year data (2014–2017). Utilizing linear regression model, results showed significance between outpatient revenue and days cash on hand as well as significant relationship between population of the metropolitan statistical area, unemployment rate of the metropolitan statistical area, and teaching hospital’s return on assets. Additionally, system membership, type of ownership/control, and teaching intensity also showed significant association with return on assets. By comprehensively examining all major teaching hospitals in the U.S. and analyzing the association between their short-term and long-term financial performance and external environmental dimensions, based upon Resource Dependence Theory, we found that by offering diverse outpatient services and novel delivery options, administrators of teaching hospitals may be able to increase organizational liquidity.

Assessing the impact of COVID-19 on outpatient and inpatient revenues: A comparative analysis of large and small hospitals in Taiwan

“…We observed marked reductions in hospital revenues, especially in larger establishments. This trend mirrors findings from countries such as the US, [25][26][27][28] Iran, [29] Indonesia, [30] Cameroon, [31] Brazil, [32] and China, [33,34] where for instance, tertiary hospitals saw significant monthly drops in both outpatient (57.91 thousand, P < .01) and inpatient visits (1.93 thousand, P < .01) and their respective revenues.…”

“…Hence, despite increased patient numbers, the revenue from patient care did not necessarily improve, as hospitals grappled with pandemic-induced workforce challenges. [25] The situation in Taiwan echoes Cantor et al's observations, which highlighted that while hospitals might have gained from the CARES Act, the funds were typically allocated to those with higher pre-COVID assets. [35] As the CARES Act predominantly contributed nonoperating income, this boosted that component of the financial statement in the studied period.…”

“…Hence, despite increased patient numbers, the revenue from patient care did not necessarily improve, as hospitals grappled with pandemic-induced workforce challenges. [25]…”

“…[24] Given the 2020 drop in patient care earnings, nonoperating income, such as that from the CARES Act, played a crucial role in generating net incomes for 2020 and 2021. [25]…”

“…Although government subsidies [14,[21][22][23]25] led to a surge in patient revenues during 2020's peak pandemic period and into 2021, [25] this was counterbalanced by rising operational costs. These costs stemmed from increased salaries, additional personal protective equipment expenditures, and heightened ICU staffing needs, especially given the surge in ventilator use during COVID-19's initial wave.…”