Relationship between profitability and financial factors of hospitals after a period of austerity and health care reforms: evidence from Greece

Abstract

PurposeThe reduction of government expenditure in the healthcare system, the difficulty of finding new sources of funding and the reduction in disposable income per capita are the most important problems of the healthcare system in Greece over the last decade. Therefore, studying the profitability of health structures is a crucial factor in making decisions about their solvency and corporate sustainability. The aim of this study is to investigate the effect of economic liquidity, debt and business size on profitability for the Greek general hospitals (GHs) during the period 2016–2018.Design/methodology/approachFinancial statements (balance sheets and income statements) of 84 general hospitals (GHs), 52 public and 32 private, over a three-year period (2016–2018), were analyzed. Spearman’s Rs correlation was carried out on two samples.FindingsThe results revealed that there is a positive relationship between the investigated determinants (liquidity, size) and profitability for both public and private GHs. It was also shown that debt has a negative effect on profitability only for private GHs.Practical implicationsIncreasing the turnover of private hospitals through interventions such as expanding private health insurance and adopting modern financial management techniques in public hospitals would have a positive effect both on profitability and the efficient use of limited resources.Originality/valueThese results, in conjunction with the findings of the low profitability of private hospitals and the excess liquidity of public hospitals, can shape the appropriate framework to guide hospital administrators and government policymakers.