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Table 1 Expected sign of the effects on quality of care

From: Performing well in financial management and quality of care: evidence from hospital process measures for treatment of cardiovascular disease

Determinant Sign Hypothesis Reference
Profitability Positive Hospitals earn additional profits when patients’ marginal valuation of quality increases with price Spence [19], Newhouse [21]
Debt level Positive Borrowing capacity stemming from the benefits of tax-exempt conduit bonds encourages nonprofit hospitals to raise more debt capital Valvona and Sloan [23]
Negative Risk of bankruptcy (or financial distress) and the associated costs cause hospitals to postpone investment and refrain from borrowing. Wedig et. al. [22]
Asset liquidity Positive Hospitals with more liquid assets are more likely to obtain external financing due to higher probability of repayment. Shleifer and Vishny [24]
Labor costs Positive The greater demand for quality of care encourages hospitals to employ a high quality workforce which incurs significant costs of labor. Feldstein [30], Chiswick [31]
Negative Excessive labor costs in the form of compensation and benefits reduce profits. Sloan [25], Sloan and Steinwald [26]
Charity care costs Negative The optimal level of uncompensated care provision depends on balancing the hospital’s marginal benefits and costs, and an oversupply of charity care could negatively impact profits. Banks et. al. [27]
Operating efficiency Positive The elimination of slack resources, wasteful capacity, dysfunctional operation and organizational chaos may lead to high quality of care. Blegen et. al. [32], Picone et. al. [33], Valdmanis et. al. [34]