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Health Serv Res. 1979 Fall; 14(3): 183–205.
PMCID: PMC1072115

Investment decision making in the health care industry: the future.


The economic and political environment in which providers of health care will operate during the 1980s will continue to be increasingly restrictive. Any private-sector organization's long-run survival depends directly on the quality of its investment decisions, broadly defined. This decision making will require three major innovations if private sector health care providers are to survive: 1) traditional biases about the economics of not-for-profit entities must be abandoned; 2) standard data, procedures, and personnel from the accounting discipline must be supplemented with information, methodologies, and people from the discipline of corporate finance; and 3) economic and fiscal risk must be measured and incorporated into both investment decisions and interactions with external regulators. Practitioners can begin to implement these innovations immediately. Although substantial literature exists developing all these concepts generally and applying them to for-profit settings, the literature purporting to treat investment decision making for private-sector health care providers is, on average, replete with conceptual error, simplistic thinking, erroneous applications, and out-of-date methodologies. The literature is, in a word, horrid. Authors, both practitioner and academic, should stop writing terrible books and booklike periodicals for easy royalty dollars, and, instead, pursue sound applied research and disseminate their results in classrooms and in refereed journals.

Full text

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Selected References

These references are in PubMed. This may not be the complete list of references from this article.
  • Wacht RF. A capital budget planning model for nonprofit hospitals. Inquiry. 1978 Sep;15(3):234–245. [PubMed]
  • Klarman HE. Application of cost-benefit analysis to the health services and the special case of technologic innovation. Int J Health Serv. 1974 Spring;4(2):325–352. [PubMed]
  • Fuchs VR. Health care and the United States economic system. An essay in abnormal physiology. Milbank Mem Fund Q. 1972 Apr;50(2):211–244. [PubMed]
  • Wittrup RD. Economic behavior of social institutions. Hosp Adm (Chic) 1975 Winter;20(1):8–16. [PubMed]
  • Nackel JG, Wesbury SA., Jr The process of resource allocation. Hosp Health Serv Adm. 1978 Fall;23(4):75–89. [PubMed]
  • Long HW. Valuation as a criterion in not-for-profit decision-making. Health Care Manage Rev. 1976 Summer;1(3):34–46. [PubMed]
  • Drebin ME. Financial information systems: the key to hospitals' survival. Hospitals. 1978 Jun 16;52(12):88–90. [PubMed]
  • Yoder AR. Is being tax-exempt really better? Hosp Financ Manage. 1978 Aug;32(8):8–18. [PubMed]
  • Silvers JB. Identity crisis: financial management in health. Health Care Manage Rev. 1976 Fall;1(4):31–46. [PubMed]
  • Hellinger FJ. The effect of certificate-of-need legislation on hospital investment. Inquiry. 1976 Jun;13(2):187–193. [PubMed]
  • Salkever DS, Bice TW. The impact of certificate-of need controls on hospital investment. Milbank Mem Fund Q Health Soc. 1976 Spring;54(2):185–214. [PubMed]

Articles from Health Services Research are provided here courtesy of Health Research & Educational Trust