The article explores the relationship between the cost and the quality
of hospital care by elaborating a conceptual model of hospital perfor
mance. The model relates the financial health status Of an organizatio
n (financial integrity) to the quality of care provided by that organi
zation (clinical integrity) within an environment that is characterize
d by various forms of risk. The model suggests that both concepts dete
rmine the corporate destiny (success, bankruptcy, or merger) of the or
ganization. If this model proves valid empirically, the results could
be used as an early warning system to identify hospitals that might ex
perience financial or clinical distress.