Impact of External Environmental Dimensions on Financial Performance of Major Teaching Hospitals in the U.S.

Abstract

Teaching hospitals have a unique mission to not only deliver graduate medical education but to also provide both inpatient and ambulatory care and to conduct clinical medical research; therefore, they are under constant financial pressure, and it is important to explore what types of external environmental components affect their financial performance. This study examined if there is an association between the short-term and long-term financial performance of major teaching hospitals in the United States and the external environmental dimensions, as measured by the Resource Dependence Theory. Data for 226 major teaching hospitals spanning 46 states were analyzed. The dependent variable for short-term financial performance was days cash on hand, and dependent variable for long-term financial performance was return on assets, both an average of most recently available 4-year data (2014–2017). Utilizing linear regression model, results showed significance between outpatient revenue and days cash on hand as well as significant relationship between population of the metropolitan statistical area, unemployment rate of the metropolitan statistical area, and teaching hospital’s return on assets. Additionally, system membership, type of ownership/control, and teaching intensity also showed significant association with return on assets. By comprehensively examining all major teaching hospitals in the U.S. and analyzing the association between their short-term and long-term financial performance and external environmental dimensions, based upon Resource Dependence Theory, we found that by offering diverse outpatient services and novel delivery options, administrators of teaching hospitals may be able to increase organizational liquidity.