DEVELOPMENT OF A PREDICTION MODEL FOR HOSPITAL CLOSURE USING FINANCIAL ACCOUNTING DATA

Numerous research studies have examined the use of financial accountin g data in the prediction of corporate bankruptcy. Partly due to a lack of available data, however, little work has been done in developing a closure prediction model specifically for hospitals. Using cost repor ts from the Health Care Financing Administration and a sample of 71 cl osed hospitals and a matched sample of 71 open hospitals, the current study examines the relationship between 21 financial accounting ratios and hospital closure. Univariate logit results indicate that hospital closure is significantly related to 17 of the 21 ratios one year prio r to closure. Results ate also presented using a multivariate model, a nd for the relationships two years prior to closure. The current study provides information helpful to users in identifying financial variab les which may be important indicators of hospital closure.