2021 Volume 58 Issue 2 Pages 26-34
Medical clinics are increasingly diversifying into various related services. We analyze the effects of different forms of diversification on profitability while controlling for other attributes that may have potential influence. Our findings from the two perspectives of operating profit ratio and loss avoidance reveal that diversification that involves the provision of concrete goods or services exerts a negative effect on clinic profitability compared to diversification that simply provides planning and support for the substance and method of the offering. In particular, four types of diversification (i.e. a combination of care-giving and residential services, three-way combination of care-giving and residential services and consultation support services, a combination of daycare services and residential services, and four-way combination) showed particularly poor performance in both operating profitability ratio and loss avoidance. However, we also find that the scale of the hospital, in terms of either assets or revenue, had a stronger influence on profitability than the types of diversification strategies mentioned above. Our results also suggest that there are numerous other variables with potential influence on profitability that were not incorporated into this study.
