Effect of Massachusetts healthcare reform on financial performance of healthcare providers: Panel data analysis

Abstract

the 2006 Massachusetts health care reform was passed to achieve universal health insurance coverage in the state. This paper analyzes the effect of this reform on financial performance of Massachusetts hospitals. This study uses financial ratios of hospitals to track changes in their financial health after implementation of universal health coverage. The event is described as the implementation of universal health coverage in Massachusetts which took effect in June 2006, and is coded as `1' for before implementation of the law and `2' for after implementation. Financial ratios and Financial Strength Indextm1 of 65 hospitals over ten years (2002-2012) are calculated and used in this study. Panel data analysis includes control variables related to event-period, total assets, and dependent variables such as operating margin and financial strength index. Principal results indicate that the health care reform significantly affects the hospitals' financial strength index in Massachusetts and the extent of impact varies from hospital to hospital due to the characteristics of hospitals in terms of total assets and hospital type. Findings also reveal that operating margin of the hospitals was not significantly affected by the healthcare reform.