Table 1.

Expected sign of the effects on quality of care

Determinant	Sign	Hypothesis	Reference
Profitability	Positive	Hospitals earn additional profits when patients’ marginal valuation of quality increases with price	Spence [19], Newhouse [21]
Debt level	Positive	Borrowing capacity stemming from the benefits of tax-exempt conduit bonds encourages nonprofit hospitals to raise more debt capital	Valvona and Sloan [23]
	Negative	Risk of bankruptcy (or financial distress) and the associated costs cause hospitals to postpone investment and refrain from borrowing.	Wedig et. al. [22]
Asset liquidity	Positive	Hospitals with more liquid assets are more likely to obtain external financing due to higher probability of repayment.	Shleifer and Vishny [24]
Labor costs	Positive	The greater demand for quality of care encourages hospitals to employ a high quality workforce which incurs significant costs of labor.	Feldstein [30], Chiswick [31]
	Negative	Excessive labor costs in the form of compensation and benefits reduce profits.	Sloan [25], Sloan and Steinwald [26]
Charity care costs	Negative	The optimal level of uncompensated care provision depends on balancing the hospital’s marginal benefits and costs, and an oversupply of charity care could negatively impact profits.	Banks et. al. [27]
Operating efficiency	Positive	The elimination of slack resources, wasteful capacity, dysfunctional operation and organizational chaos may lead to high quality of care.	Blegen et. al. [32], Picone et. al. [33], Valdmanis et. al. [34]