Are hospital managers served by current models for predicting financial distress?

During the last decade there have been major competitive changes in the health care industry. This more dynamic environment has forced hospitals to emphasize efficiency in their operations. One consequence is an increased concern with financial condition and, subsequently, with the ability to predict financial distress. This paper synthesizes several important studies on firm failure in the field of finance and compares them with recent studies of hospital survival. The inescapable conclusion is that most models predicting hospital financial distress are restricted, flawed, or both. As result, one must question whether such applications effectively serve hospital managers or public policy makers.