Cityscape with hospital building and financial charts

Hospital Check-Up: How Location Impacts Financial Health

Beau Callahan in Health & Wellness December 2025 • 4 min read.

"Uncover the surprising role of location in the financial performance of hospitals, and what it means for healthcare access and quality."

In today's world, providing healthcare is an expensive undertaking, with hospital treatments making up a large chunk of healthcare spending worldwide. That's why it's crucial to understand how hospitals can manage their finances well to ensure they can keep providing the necessary services.

One important factor that can impact a hospital's financial health is where it's located. The 'agglomeration effect' suggests that being in a city or area with lots of economic activity can bring advantages. This article will look into whether this effect is noticeable in the hospital sector, influencing financial performance.

This article is about how hospitals perform financially based on where they are located, using hospitals in Poland as a case study. Poland is an interesting example because it has navigated economic challenges fairly well and is still figuring out the best way to fund healthcare.

The Location Equation: How Cities Can Boost Hospital Finances

Cityscape with hospital building and financial charts

The idea is that hospitals in bigger cities might do better financially than those in smaller towns. This is because bigger cities have a lot going on economically, which can create a beneficial environment for businesses, including hospitals.

Think of it this way: when a hospital is in a busy city, it has access to more resources, better infrastructure, and a larger pool of skilled workers. All of these things can help the hospital run more efficiently and attract more patients.

Access to a Wider Range of Services: Big cities often have specialized medical facilities and support services, making it easier for hospitals to offer comprehensive care.
Attracting Top Talent: Cities tend to draw in experienced healthcare professionals, which can enhance the quality of care at urban hospitals.
Infrastructure Advantages: Better transportation, technology, and utilities in cities can lead to more efficient hospital operations.

To see if this idea holds true, the financial records of 118 hospitals in Poland were examined over a period of 10 years. The hospitals were divided into two groups: those in cities with over 100,000 people and those in smaller towns. Several financial factors, such as profits, debts, and assets, were analyzed to compare the performance of these two groups.

The Big Picture: Location Matters in Healthcare

The study shows that where a hospital is located can indeed have a significant impact on its financial well-being. Hospitals in larger cities tend to perform better financially due to the economic advantages that come with being in a bustling urban environment. However, it's important to remember that financial performance is just one piece of the puzzle. The ultimate goal is to ensure that everyone has access to quality healthcare, no matter where they live. While city hospitals might have a financial edge, hospitals in smaller towns play a crucial role in serving their local communities. Policymakers and hospital administrators need to consider these factors when making decisions about healthcare funding and resource allocation to create a balanced and effective healthcare system for all.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1002/hpm.2716, Alternate LINK

Title: Does The Agglomeration Effect Occur In The Hospital Sector? The Impact Of Agglomeration Economies On The Financial Performance Of Hospitals—An Evidence From Poland

Subject: Health Policy

Journal: The International Journal of Health Planning and Management

Publisher: Wiley

Authors: Bartłomiej Krzeczewski, Olga Krzeczewska, Anna Pluskota, Radosław Pastusiak

Published: 2018-12-14

Everything You Need To Know

What is meant by the term 'agglomeration effect' in the context of hospital finances, and why is it important?

The 'agglomeration effect' refers to the idea that hospitals located in areas with significant economic activity, such as larger cities, tend to have better financial performance. This is because these locations often provide greater access to resources, infrastructure, and skilled workers, which can lead to more efficient operations and the ability to attract more patients. The concept is significant because it highlights how external economic factors can influence a hospital's financial stability, which, in turn, affects its ability to provide quality healthcare services. This effect demonstrates that a hospital's financial health isn't solely dependent on internal management but also on the economic environment in which it operates.

Why does the financial health of a hospital matter for the quality of healthcare it provides?

The financial health of a hospital significantly impacts its ability to provide quality healthcare services. A financially stable hospital can invest in better technology, attract experienced healthcare professionals, and offer a wider range of services. Conversely, a hospital struggling financially may face challenges in maintaining its facilities, retaining staff, and providing comprehensive care, ultimately affecting patient outcomes and access to healthcare.

How was the study conducted to assess the impact of location on hospital financial performance?

The study examined the financial records of 118 hospitals in Poland over a 10-year period. These hospitals were categorized into two groups: those located in cities with populations over 100,000 and those in smaller towns. Researchers analyzed various financial indicators, including profits, debts, and assets, to compare the financial performance of hospitals in different locations. This approach aimed to determine whether the 'agglomeration effect' was evident in the Polish hospital sector.

What are some specific ways in which a hospital's location can impact its operations and financial health?

The location of a hospital impacts several key areas: access to a wider range of services because big cities often have specialized medical facilities and support services; attracting top talent as cities tend to draw in experienced healthcare professionals; and better transportation, technology, and utilities in cities can lead to more efficient hospital operations. The location advantages of hospitals in larger cities can lead to more efficient operations, higher-quality care, and better financial performance.

What actions can policymakers and hospital administrators take to address the financial disparities between hospitals in different locations and ensure a balanced healthcare system?

Policymakers and hospital administrators can ensure balanced and effective healthcare by considering location-based financial disparities when making decisions about healthcare funding and resource allocation. They need to recognize that while city hospitals might have a financial advantage due to the 'agglomeration effect', hospitals in smaller towns are crucial for serving their local communities. Therefore, funding models and resource distribution strategies should aim to address the unique challenges faced by hospitals in different locations to ensure equitable access to quality healthcare for everyone.