Financial Distress in Hospitals

Turnaround Management
Knowledge Center


New Topic

Frank Musmar. M.S., DBA
Professor, United States

Financial Distress in Hospitals

The financial managers of a firm in financial distress do not have the financial ability to meet scheduled payments, due to cash flow problems caused by declining asset values (Sun et al., 2014). Carlson, Lewis, and Nelson (2014) Stated that firms in financial distress inquire an increase in operational cost, which will affect the firm's financial performance.
The consequences of financial distress can be business problems such as increased accounting risk, asset risk, liability, and strategic risk (Rosenberg & Ferlie, 2014). These consequences of financial distress are disastrous, since they may lead to discontinuity of operations, increase of legal costs, administrative expenses, as well as other indirect costs (Carlson et al., 2014). Mazumder and Miller (2014) explained that apart from the adverse effects of financial distress on corporations, financial markets also suffer. It is, therefore, necessary to assess financial conditions of the firm from time to time to evaluate its liquidity position. Predicting business failure will help the management take preventive measures, such as operational policy changes, reorganizing the firm's financial structure, voluntary liquidation, and adopting good corporate governance practices (Mazumder & Miller, 2014).

Hospital financial distress is a common problem in the health care industry. From 1995 to 2010, 15-30% of hospitals were considered financially distressed based on a negative total profit margin (Richards, 2014). Very few authors to date have assessed in studies the effect of hospital financial distress on quality of care indicators or patient outcomes. Richards (2014) conducted a comprehensive and systematic literature review to assess hospital financial distress and quality of care or patient outcomes. After conducting the systematic literature review, Richards (2014) stated that it was clear that very few studies ever assessed the relationship between hospital financial distress and patient outcomes, because of the various measures of hospital financial distress. Despite the limited research on this topic, Richards (2014) suggested there was a significant relationship between hospital financial distress and patient outcomes.

Start a new forum topic


More on Turnaround Management
What is Turn Around Time?
Turnaround Management in India
Two Dimensions to Turnaround Management
Recognizing When Turnaround is a Must
Turnaround Management and Culture
Financial Distress in Hospitals
Whatever the Name Tag, Turnaround Management is Desirable
Linear Programming and Turnaround Management
Turnaround Professional Certification
Start with Call to Action
Turnaround Management in Upstream Oil & Gas Facilities (FPSO Specific)
Recovery and Turnaround
Best Practices
Does TM Apply to Organizational Departments Also?
Turnaround Management is like Surgery
Use an Insider or an Outsider as a Turnaround Manager?
Role of Marketing in Business Turnaround
Periodic Health Check of Organization and Turnaround Management
Special Interest Group

Are you interested in Turnaround Management? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:

Turnaround Management
Knowledge Center

About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2021 12manage - The Executive Fast Track. V15.8 - Last updated: 21-4-2021. All names of their owners.