Hospital financial stress is a common problem. From 1995-2010 15-30% of hospitals every year were classified as financially distressed based on a negative total profit margin. However, very few studies to date have assessed the impact of hospital financial distress on quality of care indicators or patient outcomes. A comprehensive and systematic literature review was conducted to assess the state of the science on hospital financial distress and quality of care or patient outcomes. A total of three peer-reviewed articles were found that used a measure of hospital financial distress as an exposure with a quality of care indicator or health-related factor as an outcome. However, despite the limited research on this topic, the evidence suggested there was an important relationship between hospital financial distress and patient outcomes. What became clear after the systematic literature review was that not only had very few studies ever assessed the relationship between hospital financial distress and patient outcomes, but there was also limited evidence on the validity of various measures of hospital financial distress.

An analysis conducted as part of this dissertation assessed the validity of profit margin, as well as two composite measures, the Financial Strength Index and the modified z-index, to see how well they predicted hospital closure. Overall, despite the added complexity of the Financial Strength Index and the modified z-index compared to profit margin, all three measures performed similarly with respect to predicting hospital closure. Finally, profit margin, as a measure of hospital financial distress was used to predict the receipt of immediate breast reconstruction. Women undergoing mastectomy at hospitals under high levels of hospital financial distress were significantly less likely to receive immediate breast reconstruction compared to women treated at hospitals under minimal to no financial distress, adjusting for important confounders. This means hospital financial distress is an important, although unwarranted, determinant of breast cancer care.