The Development of Not-For-Profit Hospital Cost Models

Abstract

Abstract The objective of this study was to develop disaggregated not-for-profit hospital regression cost models which may have use as accounting tools. Such models can theoretically be used as forecast tools or in the analytical review phase of an audit. A sample population of 200 hospitals (located in New York, New Jersey, and Pennsylvania) was derived from the 1984 American Hospital Association data tape of the 1983 Annual Survey of Hospitals. The dependent variables were payroll, benefit, interest, depreciation, other, fee, and total expenses. The independent variables were either descriptors of output or product-mix. Seven models were developed by separately regressing a set of twelve independent variables on to each of the seven expense variables. Four models had R2's of approximately .90 and were significant at the .05 level; payroll, benefit, other, and total expenses. These four expenses account for about 90% of an average hospital's total costs. The model for depreciation expenses was also signi...