Factors Associated with Hospital Bankruptcies: A Political and Economic Framework

Abstract

Between 2000 and 2006, 42 U.S. acute care hospitals filed for bankruptcy protection under federal law. This article explores hospital bankruptcies over a six-year period. Bankrupt hospitals are compared with their competitors, and hospitals surviving bankruptcy are compared with those organizations that eventually close. Finally, this article identifies nonfinancial factors associated with the filings and categorizes these factors into a political and economic framework. A literature review of hospital trade publications is used to identify organizations filing for bankruptcy during this period. Data gathered from these resources are used in concert with American Hospital Association data to identify hospital characteristics and publicly available information on factors surrounding hospital bankruptcy filings. Data on the status of hospitals after filing are also collected to determine whether bankruptcy reorganization is successful or results in hospital closure. Results indicate that 67 percent of hospitals filing for bankruptcy during this time eventually ceased operating. Bankrupt hospitals are smaller than their competitors. They are also less likely to belong to a system and more likely to be investor owned. Factors associated with filing organizations are placed into a political and economic framework derived from Park's work on municipal bankruptcy filings. Common nonfinancial factors associated with hospital bankruptcies include mismanagement, increased competition, and reimbursement changes.