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Member Research and Reports

Member Research and Reports

LSU: Financial Distress and Bankruptcy Prediction in Acute Care Hospitals

Dr. Dean Smith, Louisiana State University Health Sciences Center School of Public Health School of Public Health (LSUHSC SPH) , professor in health policy and systems management and SPH dean, has jointly published a new research study with the purpose of examining and comparing the accuracy of three financial distress prediction models and their ability to predict bankruptcy for U.S. acute care hospitals. The article titled, “Financial Distress and Bankruptcy Prediction: A Comparison of Three Financial Distress Prediction Models in Acute Care Hospitals,” is published in the Journal of Health Care Finance.

Researchers have frequently employed traditional financial distress prediction models in various industries. However, the reliability of those models in the hospital industry was not tested. This poses a question of the applicability and the prediction accuracy of distress prediction models in acute care hospitals. In this study, we compared three financial distress and bankruptcy prediction models in U.S. acute care hospitals. All three measures tap into more than one domain of hospital finance. Researchers have developed different financial distress prediction models being aware of the fact that an ability to predict an organization’s movement towards failure early is advantageous for all stakeholders of the business [23]. We captured the predictive ability of the three distress prediction models at least 3 years prior to the event of bankruptcy and compared the accuracy prediction of all the models.

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