The Financial Fragility of For-Profit Hospitals: Evidence from the COVID-19 Pandemic

39 Pages Posted: 15 Nov 2021

See all articles by Ge Bai

Ge Bai

Johns Hopkins University - Carey Business School

Daniel Jiménez

International Monetary Fund (IMF)

Phillip Phan

Johns Hopkins University - Carey Business School

Luis Quintero

Johns Hopkins University - Carey Business School

Alessandro Rebucci

Johns Hopkins University - Carey Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Xian Sun

Johns Hopkins University - Carey Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2021

Abstract

We estimate the likelihood of financial distress of U.S. hospitals in 2020 due to the COVID-19 pandemic using AHA Annual Survey data for 2011-2019 and smartphone mobility data for 2020. We find that while the average likelihood of distress across all hospitals is 28.53 % in 2020, slightly increasing from 2019, for-profit hospitals are much more likely to be distressed. Their average likelihood of financial distress is 39.13 %---a 6.93 percentage point increase from 2019. For-profit hospitals are the main providers of specialty health care services, such as psychiatric and acute long-term care, so their increased likelihood of distress poses a risk to service provision in these specialty areas, and particularly in rural communities. Our prediction model based on mobility data performs very well in sample against actual data and can potentially help policymakers and hospital administrators to monitor financial distress in real-time when case mixes change, or other large shocks materialize.

Keywords: Altman Z-score, COVID-19, financial distress, for-profit hospitals, mobility data, service provision

JEL Classification: G30, H51, I1, R51

Suggested Citation

Bai, Ge and Jiménez, Daniel and Phan, Phillip H. and Quintero, Luis and Rebucci, Alessandro and Sun, Xian, The Financial Fragility of For-Profit Hospitals: Evidence from the COVID-19 Pandemic (October 1, 2021). CEPR Discussion Paper No. DP16650, Available at SSRN: https://ssrn.com/abstract=3960233

Ge Bai (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Daniel Jiménez

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Phillip H. Phan

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Luis Quintero

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Alessandro Rebucci

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu/faculty-research/faculty-directory/alessandro-rebucci-phd

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Xian Sun

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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