Comparing Financial Reporting Practices of For-Profit and Non-Profit Hospitals in the U.S.

What is it about?

This article investigates how different types of hospital ownership (for-profit versus non-profit) in the United States influence their practices in earnings management. The study uses a comprehensive dataset of U.S. hospitals from 2011 to 2016 to examine the variations in both accrual-based and real earnings management techniques. The main focus is on understanding whether for-profit hospitals use different strategies compared to non-profit hospitals for managing their earnings, and if so, how these strategies vary. The research provides insights into the financial reporting behaviors of hospitals, particularly in terms of manipulating earnings to meet specific financial targets or to align with their operational objectives.

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Photo by Alexander Mils on Unsplash

Photo by Alexander Mils on Unsplash

Why is it important?

This research is significant as it sheds light on the different financial reporting strategies adopted by for-profit and non-profit hospitals in the U.S., an area with substantial economic and social implications. Understanding these differences is crucial as hospitals play a vital role in healthcare delivery and their financial stability and reporting practices can have widespread impacts. For-profit hospitals are found to engage more in earnings manipulation, which could affect their financial transparency and the trust of stakeholders. On the other hand, non-profit hospitals, which are expected to prioritize community welfare over financial gains, show lesser involvement in such practices. This distinction is essential for regulators, investors, policy makers, and the public to ensure that hospitals are operating in a manner consistent with their stated missions and societal expectations.