Financial Distress and Bankruptcy Prediction: A Comparison of Three Financial Distress Prediction Models in Acute Care Hospitals
The Journal of Health Care Finance
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Title |
Financial Distress and Bankruptcy Prediction: A Comparison of Three Financial Distress Prediction Models in Acute Care Hospitals
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Creator |
Puro, PhD, Neeraj; Florida Atlantic University, College of Business, Department of Health Administration
Borkowski, DBA, Nancy; University of Alabama at Birmingham, School of Health Professions, Department of Health Services Administration Hearld, PhD, Larry; University of Alabama at Birmingham, School of Health Professions, Department of Health Services Administration Carroll, PhD, Nathaniel; University of Alabama at Birmingham, School of Health Professions, Department of Health Services Administration Byrd, PhD, James; University of Alabama at Birmingham, Collat School of Business, Department of Accounting and Finance Smith, PhD, Dean; LSU Health Sciences Center New Orleans, School of Public Health, Department of Health Policy and Systems Management Ghiasi, PhD, Akbar; University of Incarnate Word, H-E-B School of Business and Administration, Healthcare Administration Department |
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Description |
The purpose of this study is to examine and compare the accuracy of three financial distress prediction models: modified Altman Z score (1993), Ohlson O score (1980) and Zmijewski score (1984) and their ability to predict bankruptcy for US acute care hospitals. We pose two research questions: 1) What is the more accurate model in predicting financial distress resulting in bankruptcy, and 2) What financial ratios in each of those models differentiate bankrupt hospitals from financially healthy hospitals?We analyzed 106 hospitals (53 hospitals that filed for bankruptcy and 53 that were financially stable) between the years 2006 and 2017 to compare the accuracy of the three models in predicting bankruptcy. We found that the modified Altman Z score (1993) was more effective in predicting financial distress resulting in bankruptcy of US acute care hospitals when compared to the Ohlson O score (1980) and Zmijewski (1984). However, we did not find significance regarding the financial ratios among the three models in differentiating bankrupt hospitals from non-bankrupt hospitals. In other words, a single financial ratio was not found to be consistent that separated bankrupt hospitals from non-bankrupt for all three years prior to a bankruptcy. Thus, managers should not rely on just one financial ratio as an indicator of financial distress.
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Publisher |
Worldwebtalk.com, Inc.
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Contributor |
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Date |
2019-12-27
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Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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Format |
application/pdf
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Identifier |
http://healthfinancejournal.com/index.php/johcf/article/view/199
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Source |
Journal of Health Care Finance; Vol. 46, No. 2, FALL 2019
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Language |
eng
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Relation |
http://healthfinancejournal.com/index.php/johcf/article/view/199/202
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Rights |
Copyright (c) 2020 Journal of Health Care Finance
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