Hospital selection into multihospital systems. The effects of market, management, and mission

Chain Hospitals in the Health Industry: A Scoping Review of Principles and Definitions

In order to provide quality and cost-effective health care, hospitals have used a variety of organizational models. Chain hospitals are one type of organization and service delivery model. Based on the diversity, multiplicity, and ambiguous nature of concepts related to chain hospitals, this study is an attempt to explain the concepts and components of such hospitals. Five main databases were searched for this purpose. Scopus, PubMed, WOS, ProQuest, and Wiley library databases were accessed from inception to September 2022. English-language studies describing chain hospital models were included. Two independent authors screened full-text papers, and data were extracted using a self-designed form. A thematic analysis was used to identify key components of the chain hospitals. A total of 38 papers from 8472 documents met the inclusion criteria and were included in the study. Among the selected studies, there were 23 quantitative studies, 6 qualitative studies, 5 mixed studies, 3 review studies, and 1 gray report. A review of the results revealed 55 different definitions of chain hospitals, as well as 6 main components and 16 subcomponents. Among the extracted components, 60% were related to the organization dimension, 15% to governance, 9% to decision rights, 8% to policies and procedures, and 4% to service delivery. In order to launch a multihospital system involving chain hospitals in a country, it is necessary first to define the concept of this hospital. The study's findings should be used by policymakers and officials in each country before implementing an inter-hospital cooperation system (MHS, chain hospital, etc.). Future researchers may also find inspiration in the study's findings and focus on these hospitals' establishment, effectiveness, and financial effects.

Two Decades of Organizational Change in Health Care: What Have we Learned?

The 1980s and 1990s witnessed a substantial wave of organizational restructuring among hospitals and physicians, as health providers rethought their organizational roles given perceived market imperatives. Mergers, acquisitions, internal restructuring, and new interorganizational relationships occurred at a record pace. Matching this was a large wave of study and discourse among health services researchers, industry experts, and consultants to understand the causes and consequences of organizational change. In many cases, this literature provides mixed signals about what was accomplished through these organizational efforts. The purpose of this review is to synthesize this diverse literature. This review examines studies of horizontal consolidation and integration of hospitals, horizontal consolidation and integration of physician organizations, and integration and relationship development between physicians and hospitals. In all, around 100 studies were examined to assess what was learned through two decades of research on organizational change in health care.

Improving clinical research and cancer care delivery in community settings: evaluating the NCI community cancer centers program

BACKGROUND

In this article, we describe the National Cancer Institute (NCI) Community Cancer Centers Program (NCCCP) pilot and the evaluation designed to assess its role, function, and relevance to the NCI's research mission. In doing so, we describe the evolution of and rationale for the NCCCP concept, participating sites' characteristics, its multi-faceted aims to enhance clinical research and quality of care in community settings, and the role of strategic partnerships, both within and outside of the NCCCP network, in achieving program objectives.

DISCUSSION

The evaluation of the NCCCP is conceptualized as a mixed method multi-layered assessment of organizational innovation and performance which includes mapping the evolution of site development as a means of understanding the inter- and intra-organizational change in the pilot, and the application of specific evaluation metrics for assessing the implementation, operations, and performance of the NCCCP pilot. The assessment of the cost of the pilot as an additional means of informing the longer-term feasibility and sustainability of the program is also discussed.

SUMMARY

The NCCCP is a major systems-level set of organizational innovations to enhance clinical research and care delivery in diverse communities across the United States. Assessment of the extent to which the program achieves its aims will depend on a full understanding of how individual, organizational, and environmental factors align (or fail to align) to achieve these improvements, and at what cost.

A market, operation, and mission assessment of large rural for-profit hospitals with positive cash flow

CONTEXT

National benchmark data for 2002 indicate that large rural for-profit hospitals have a median cash flow margin of 19.5% compared to 9.2% for their nonprofit counterparts.

PURPOSE

This study aims to gain insight regarding the driving factors behind the high cash flow performance of large rural for-profit hospitals.

METHODS

Using 3 annual periods of Centers for Medicare and Medicaid cost report data with the last fiscal year ending between September 30, 2002, and August 30, 2003, the study found a cash flow margin of 21.5% for the large rural for-profit hospitals. All these facilities were owned by hospital management companies. To assess their underlying market, operational, and mission factors, these hospitals were compared to a similar comparison group of large rural nonprofit hospitals that are system owned and have positive cash flows.

FINDINGS

Using logistic regression analysis, the study found lower operating expense per adjusted discharge and salary expense as a percentage of total operating expense among large rural for-profit, system-owned hospitals with positive cash flows relative to nonprofits with similar traits.

CONCLUSION

Overall, the findings of this study reflect how these for-profit hospitals, which are owned by hospital management companies, focus on controlling their labor costs as well as operating costs per discharge in order to achieve a greater positive cash flow position.

The paradox of the not-for-profit hospital

This quantitative research study assesses the organizational characteristics, market factors, and performance of not-for-profit hospitals in the United States. These results have managerial implications related to hospital efficiency, organizational performance, and the role of not-for-profit hospitals within local communities. The study has policy implications on access to clinical services within local communities, the availability of charity care, and the long-term viability of the not-for-profit health care industry due to potential bankruptcy and closure. This study clearly demonstrates that not-for-profit hospital managers are faced with declining profitability and are challenged to reduce hospital-operating expenses while meeting their charitable mission. Additionally, the greater size and increased clinical complexity of not-for-profit hospitals are increasing organizational overhead. In many cases, the increased clinical complexity is a commitment to the organizational mission of providing a full range of services to the community. From a policy perspective, the study suggests that not-for-profit hospitals have aging facilities and reduced cash flow due to lower profit margins. As a result, many not-for-profit hospitals face potential bankruptcy and closure. This study clearly documents a threat to the provision of charity care in local communities and the long-term viability of the not-for-profit health care industry in the United States.

Efficiency of federal hospitals in the United States

This study evaluates the technical efficiency of federal hospitals in the United States using a variable returns to scale, input-oriented, data envelopment analysis (DEA) methodology. Hospital executives, health care policy-makers, taxpayers, and other stakeholders, benefit from studies that improve the efficiency of federal hospitals. Data for 280 federal hospitals in 1998 and 245 in 2001 were analyzed using DEA to measure hospital efficiency. Results indicate overall efficiency in federal hospitals improved from 68% in 1998 to 79% in 2001. However, based upon 2001 spending of $42.5 billion for federal hospitals potential savings of $2.0 billion annually are possible through more efficient management of resources. From a policy perspective, this study highlights the importance of establishing more specific policies to address inefficiency in the federal health care industry.

The hospitalist model: a strategy for success in US hospitals?

As the population continues to age and Medicare continues to reduce inpatient reimbursement levels, the hospitalist practice model may enhance hospital performance and improve the allocation of inpatient resources. Data for this study were obtained from the 2001 AHA annual survey, the Area Resource File and the CMS Minimum Data Set. Descriptive statistics were evaluated and a logistic regression model was used to examine those organizations using the hospitalist model in contrast to those without. The study found that organizations using the hospitalist model are located in communities with higher HMO penetration, have more hospital beds, more clinical services, and more managed care contracts. In addition, organizations with the hospitalist model have higher occupancy rates, a higher return on assets, and a lower average length of stay. From a managerial perspective, this study clearly demonstrates the hospitalist model will improve efficiency and profitability. From a policy perspective, the hospitalist model will increase efficiency, reduce length of stay, and improve the allocation of resources within the inpatient hospital industry. The link between hospital profitability and the use of the hospitalist model suggests that this is a viable clinical approach to managing acute care in hospitals as a mechanism to improve financial performance and potentially quality of care.

Association of Market, Mission, Operational, and Financial Factors on Hospital Acquisition Prices

Since the Balanced Budget Act of 1997, there has been a decline in the number of hospital acquisitions. Using data from 1999 through 2001, we examined the relationship between market, mission, operational, and financial factors on hospital acquisition prices. Using an ordinary least squares regression model, we found that acquiring multihospital systems paid a higher price for larger hospitals with fewer unoccupied beds and greater profitability. Although only marginally significant, we also found that acquiring hospital systems paid a higher purchase price for hospitals in near urban markets and for hospitals located in the Central region of the United States. From a policy standpoint, we found no significant difference in the purchase price paid between for-profit and nonprofit hospitals.

Factors Influencing Health Information System Adoption in American Hospitals

OBJECTIVES

To study the number of health information systems (HISs), applicable to administrative, clinical, and executive decision support functionalities, adopted by acute care hospitals and to examine how hospital market, organizational, and financial factors influence HIS adoption.

METHODS

A cross-sectional analysis was performed with 1441 hospitals selected from metropolitan statistical areas in the United States. Multiple data sources were merged. Six hypotheses were empirically tested by multiple regression analysis.

RESULTS

HIS adoption was influenced by the hospital market, organizational, and financial factors. Larger, system-affiliated, and for-profit hospitals with more preferred provider organization contracts are more likely to adopt managerial information systems than their counterparts. Operating revenue is positively associated with HIS adoption.

CONCLUSION

The study concludes that hospital organizational and financial factors influence on hospitals' strategic adoption of clinical, administrative, and managerial information systems.

Multihospital system membership and patient treatments, expenditures, and outcomes

OBJECTIVE

To determine the relationship between hospital membership in systems and the treatments, expenditures, and outcomes of patients.

DATA SOURCES

The Medicare Provider Analysis and Review dataset, for data on Medicare patients admitted to general medical-surgical hospitals between 1985 and 1998 with a diagnosis of acute myocardial infarction (AMI); the American Hospital Association Annual Survey, for data on hospitals.

STUDY DESIGN

A multivariate regression analysis. An observation is a fee-for-service Medicare AMI patient admitted to a study hospital. Dependent variables include patient transfers, catheterizations, angioplasties or bypass surgeries, 90-day mortality, and Medicare expenditures. Independent variables include system participation, other admission hospital and patient traits, and hospital and year fixed effects. The five-part system definition incorporates the size and location of the index admission hospital and the size and distance of its partners.

PRINCIPAL FINDINGS

While the effects of multihospital system membership on patients are in general limited, patients initially admitted to small rural system hospitals that have big partners within 100 miles experience lower mortality rates than patients initially admitted to independent hospitals. Regression results show that to the extent system hospital patients experience differences in treatments and outcomes relative to patients of independent hospitals, these differences remain even after controlling for the admission hospital's capacity to provide cardiac services.

CONCLUSIONS

Multihospital system participation may affect AMI patient treatment and outcomes through factors other than cardiac service offerings. Additional investigation into the nature of these factors is warranted.

Do HMOs have monopsony power?

OBJECTIVE

To determine whether health maintenance organizations (HMOs) have monopsony power in the markets for ambulatory care and inpatient hospital services.

DATA SOURCES

A pooled time-series of data on all HMOs operating in the United States from 1985 through 1997. Information reported to InterStudy on HMO market areas and enrollment is linked to financial data reported to state regulators and county characteristics from the Area Resource File (ARF).

STUDY DESIGN

We use a two-stage design to test for the existence of monopsony power. First, we estimate regression equations for the prices paid by HMOs for ambulatory visits and inpatient hospital days. The key independent variable is a measure of the importance of an individual HMO as a buyer of ambulatory care or hospital services. Second, we estimate regressions for the utilization of ambulatory visits and inpatient hospital days per HMO enrollee, as a function of HMO buying power and other variables.

PRINCIPAL FINDINGS

Increased HMO buying power is associated with lower price and higher utilization of hospital services. Buying power is not related to ambulatory visit price or utilization per member.

CONCLUSIONS

Our findings are not consistent with the monopsony hypothesis. They suggest that managed care organizations have contributed to a welfare-increasing breakup of hospital monopoly power. The role of HMOs as buyers of ambulatory services is more complex. We discuss possible reasons why buying power may not affect price or utilization of ambulatory visits.

The Effects of Relative Resource Configuration, Organizational Legitimacy, and Integration on Divestiture Decisions among Health Systems

This study examines the determinants of divestiture in health systems. Financial performance is a common indicator of a hospital's value. However, health systems may consider other factors that influence a hospital's value to the system. To enhance our understanding of hospital divestiture, we identify factors that enhance a hospital's value to the system and thus its likelihood of being retained. Our findings support previous studies that financial performance influences divestiture decisions. At the same time, our results identify three other factors influencing divestiture decisions: relative resource configuration, legitimacy, and integration.

Antecedents of hospital ownership conversions, mergers, and closures

This study assesses the determinants of conversions in hospital ownership from 1986 through 1996. To place such changes in context, we also analyze causes of hospital mergers and closures, which are often alternatives to hospital ownership conversion. A consistent result from our analysis is that an important antecedent of ownership conversions is a low profit margin. Conversions from private nonprofit or government ownership to for-profit status are preceded by chronically low margins and high debt-to-asset ratios. By contrast, conversions from for-profit ownership occur quickly following declines in margins. Many mergers seem motivated by a desire to increase market power--a consideration not evident for conversions.

U.S. hospital industry restructuring and the hospital safety net

The U.S. hospital industry was reshaped during the 1990s, with many hospitals becoming members of health systems and networks. Our research examines whether safety net hospitals (SNHs) were generally included or excluded from these arrangements, and the factors associated with their involvement. Our analysis draws on the earlier work of Alexander and Morrisey (1988), and not only studies factors affecting SNH participation in multihospital arrangements but also updates their earlier study. We constructed measures for hospital market conditions, management, and mission, and examined network and system affiliation patterns between 1994 and 1998. Our findings suggest that larger and more technically advanced hospitals joined systems in the 1990s, which contrasts with 1980s findings that smaller, financially weak institutions joined systems. Further, SNH participation in networks and systems was more common when hospitals faced less market pressure and where only a limited number of unaffiliated hospitals remained. If networks and systems are key parties in negotiating with private payers, SNHs may be going it alone in these negotiations in highly competitive markets.

Hospital cost efficiency and system membership

Using a recently developed taxonomy of hospital organizations, this paper estimates a stochastic frontier cost function to test for inefficiency differences among system hospitals having common strategic and/or structural characteristics. System hospitals that centralized around physician arrangements and insurance products display the smallest deviations from the least cost locus. This suggests efficiency benefits from organization of physician and insurance activities at the system level, with discretion over the array of service offerings left to individual members. Policymakers should be mindful of potential efficiency gains from hospital consolidations and be aware that common ownership alone may be too general a rubric for evaluating those gains usefully.

Strategic hospital alliances: do the type and market structure of strategic hospital alliances matter?

BACKGROUND

Throughout the 1990s, hospitals formed local alliances to defend against increasingly powerful hospital rivals and to improve their market positions relative to aggressive and consolidating managed-care organizations. An important consequence of hospitals combining or aligning horizontally at the local level is a significant consolidation of hospital markets.

OBJECTIVE

The aim of this study was to examine the relationship between the type of the local strategic hospital alliances (SHAs), market, environment, and operational factors with financial performance.

METHODS

The study is a cross-sectional analysis of the financial performance across SHAs in all metropolitan statistical areas in 1995.

RESULTS

SHAs with dominant or dominant for-profit (FP) hospitals are not more financially successful than other SHAs. SHAs in markets with high health maintenance organization (HMO) or SHA penetration have lower revenues per case-mix adjusted discharge. The operational characteristics, proportion of teaching members in the SHA, and SHA bed size, result in higher revenues and expenses, whereas greater SHA technical efficiency results in lower costs.

CONCLUSIONS

Health care organizations are centralizing their operations and governance. This study shows that this trend has not added financial value to hospital collectives, at least at this point in their development.

Consequences of organizational change in U.S. hospitals

Organizational change has become commonplace among U.S. hospitals. Empirical investigations of the consequences of organizational change, however, are relatively scarce, and findings of existing studies are inconsistent. In this article, the authors review the rationale and performance implications of hospital organizational change in three areas: (1) the development of new multi-institutional arrangements, (2) change in traditional ownership and management configurations, and (3) diversification in organizational products/services and consolidation of organizational scale. Empirical research on hospital change published between 1980 and 1999 in the health services research, social science, and business literatures is reviewed to highlight the potential pitfalls that hospitals may encounter in their effort to remain viable. The article also summarizes the strengths and weaknesses of current hospital change research and provides specific suggestions for future research in this area.

Multihospital system affiliation as a survival strategy for rural hospitals under the prospective payment system

The introduction of Medicare's Prospective Payment System (PPS) has disproportionately increased financial pressures on rural hospitals and posed challenges to the survival of these institutions. Increasingly, rural hospitals are seeking strategies that can enhance their chances for survival in a turbulent and hostile environment. This study examined the survival effects of one such strategy, multihospital system affiliation. Specifically, we assessed: (1) whether and how different types of system affiliation in the post-PPS era affect the likelihood of rural hospital survival; (2) whether particular structural, environmental and hospital performance characteristics moderate the effects of system affiliation on rural hospital survival; and (3) whether systematic selection by rural hospitals into multihospital systems potentially accounts for observed relationships between system affiliation and survival. Proportional hazards analyses indicate that system affiliation with investor-owned systems significantly reduces survival probabilities of rural hospitals. Affiliation with not-for-profit systems or system affiliation under contract management arrangements does not affect survival probabilities of rural hospitals. These general findings are moderated by the effects of hospital ownership and size at the time of affiliation. Finally, study findings indicated that systematic selection by poor performing rural hospitals into investor-owned systems has occurred in the post-PPS era. No evidence of selection into not-for-profit systems was discovered.

Small hospitals with positive cash flow: why are they winners?

This study evaluates the cash flow performance of hospitals that are at a greater risk of closure, specifically small hospitals. Sampling the majority of small acute-care hospitals in the United States, the study evaluates urban and rural small hospitals with positive cash flows for four consecutive fiscal periods and compares them with urban and rural hospitals with consecutive negative cash flows. In both urban and rural settings, positive cash flow small hospitals operate under a not-for-profit form of ownership and have lower operating costs, a faster collection of receivables. They also own newer, larger facilities, possess a Medicare higher case mix index, and offer more services in markets with lower per capita income.