Does system membership enhance financial performance in hospitals?

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.

The association between operating margin and surgical diversity at Critical Access Hospitals

Context

Surgical volume is correlated with increased hospital profitability, yet many Critical Access Hospitals (CAHs) offer few or no inpatient surgical services.

Objectives

This study aims to investigate the impact of the presence of different inpatient surgical services on CAH profitability.

Methods

The study design was a cross-sectional analysis of financial data from the most recent fiscal year (FY) of 1299 CAHs. Multiple linear regression was utilized to assess how the operating margin was affected by the number of different inpatient surgical services offered per hospital. Covariates known to be associated with hospital profitability included occupancy rate, case mix index (CMI), system affiliation, ownership status (public, private, or nonprofit), and geographic region.

Results

The regression model for the CAH operating margin returned an R2 value of 0.18. Each additional inpatient surgical service corresponded to a 1.5% increase in operating margin (p=0.0413). Each 10% increase in occupancy rate and 0.1 increase in CMI corresponded to a 0.9% increase in operating margin (p=0.0032 and p=0.0176, respectively). The number of surgical services offered per CAH showed positive correlations with occupancy rate (r=0.23, p<0.0001) and CMI (r=0.59, p<0.0001).

Conclusions

A positive correlation exists between operating margin and the diversity of inpatient surgical specialties available at CAHs. Furthermore, providing surgery allows CAHs to accommodate higher occupancy rates and case mixes, both of which are significantly and positively correlated with CAH operating margin.

Rural Hospital Mergers Increased Between 2005 and 2016-What Did Those Hospitals Look Like?

The objective of this study is to determine whether key hospital-level financial and market characteristics are associated with whether rural hospitals merge. Hospital merger status was derived from proprietary Irving Levin Associates data for 2005 through 2016 and hospital-level characteristics from HCRIS, CMS Impact File Hospital Inpatient Prospective Payment System, Hospital MSA file, AHRF, and U.S. Census data for 2004 through 2016. A discrete-time hazard analysis using generalized estimating equations was used to determine whether factors were associated with merging between 2005 and 2016. Factors included measures of profitability, operational efficiency, capital structure, utilization, and market competitiveness. Between 2005 and 2016, 11% (n = 326) of rural hospitals were involved in at least one merger. Rural hospital mergers have increased in recent years, with more than two-thirds (n = 261) occurring after 2011. The types of rural hospitals that merged during the sample period differed from nonmerged rural hospitals. Rural hospitals with higher odds of merging were less profitable, for-profit, larger, and were less likely to be able to cover current debt. Additional factors associated with higher odds of merging were reporting older plant age, not providing obstetrics, being closer to the nearest large hospital, and not being in the West region. By quantifying the hazard of characteristics associated with whether rural hospitals merged between 2005 and 2016, these findings suggest it is possible to determine leading indicators of rural mergers. This work may serve as a foundation for future research to determine the impact of mergers on rural hospitals.

How Does Electronic Health Information Exchange Affect Hospital Performance Efficiency? The Effects of Breadth and Depth of Information Sharing

EXECUTIVE SUMMARY

This research was motivated by the large investment in health information technology (IT) by hospitals and the inconsistent findings related to the effects of health IT adoption on hospital performance. Building on resource orchestration theory and the information systems literature, the authors developed a research model to investigate how the configuration strategies for sharing information under health IT systems affect hospital efficiency. The hypotheses were tested using data from the 2010 annual and IT surveys of the American Hospital Association, Centers for Medicare & Medicaid Services case mix index, and U.S. Census Bureau's small-area income and poverty estimates. The study revealed that in health IT systems, the breadth (extent) and depth (level of detail) of digital information sharing among stakeholders each has a curvilinear relationship with hospital efficiency. In addition, breadth and depth reinforce each other's positive effects and attenuate each other's negative effects, and their balance has a positive effect on hospital efficiency. The results of this research have the potential to enrich the literature on the value of adopting health IT systems as well as in providing practitioner guidelines for meaningful use.

High Medicaid Nursing Homes: Organizational and Market Factors Associated With Financial Performance

High Medicaid nursing homes (85% and higher of Medicaid residents) operate in resource-constrained environments. High Medicaid nursing homes (on average) have lower quality and poorer financial performance. However, there is significant variation in performance among high Medicaid nursing homes. The purpose of this study is to examine the organizational and market factors that may be associated with better financial performance among high Medicaid nursing homes. Data sources included Long-Term Care Focus (LTCFocus), Centers for Medicare and Medicaid Services' (CMS) Medicare Cost Reports, CMS Nursing Home Compare, and the Area Health Resource File (AHRF) for 2009-2015. There were approximately 1108 facilities with high Medicaid per year. The dependent variables are nursing homes operating and total margin. The independent variables included size, chain affiliation, occupancy rate, percent Medicare, market competition, and county socioeconomic status. Control variables included staffing variables, resident quality, for-profit status, acuity index, percent minorities in the facility, percent Medicaid residents, metropolitan area, and Medicare Advantage penetration. Data were analyzed using generalized estimating equations with state and year fixed effects. Results suggest that organizational and market slack resources are associated with performance differentials among high Medicaid nursing homes. Higher financial performing facilities are characterized as having nurse practitioners/physician assistants, more beds, higher occupancy rate, higher Medicare and Medicaid census, and being for-profit and located in less competitive markets. Higher levels of Registered Nurse (RN) skill mix result in lower financial performance in high Medicaid nursing homes. Policy and managerial implications of the study are discussed.

The Privatization of Public Hospitals: Its Impact on Financial Performance

This study examined the effects of public hospitals' privatization on financial performance. We used a sample of nonfederal acute care public hospitals from 1997 to 2013, averaging 434 hospitals per year. Privatization was defined as conversion from public status to either private not-for-profit (NFP) or private for-profit (FP) status. Financial performance was measured by operating margin (OM) and total margin (TM). We used hospital level and year fixed effects linear panel regressions with nonlagged independent and control variables (Model 1), lagged by 1 year (Model 2), and lagged by 2 years (Model 3). Privatization to FP was associated with 17% higher OM (Model 2) and 9% higher OM (Model 3), compared with 3%, 4%, and 6% higher OM for privatization to NFP for all three Models, respectively. Privatization to FP was associated with 7% higher TM (Model 2) and privatization to NFP was associated with 2% higher TM (Model 3).

Effects of Specialty Hospitals on the Financial Performance of General Hospitals, 1997–2004

Hospital specialization has become a controversial topic, culminating in a moratorium issued in 2003 by Congress directing the Centers for Medicare and Medicaid Services to cease payments to new physician-owned specialty hospitals for those Medicare and Medicaid patients referred by physicians with a financial interest in the facility. This paper focuses on one important economic question: does the presence of specialty hospitals in a market affect general hospitals' financial performance? We estimate longitudinal fixed-effects models for a national panel of short-term acute care hospitals for the period 1997 though 2004; models are estimated for general hospital patient-care revenue, costs, and operating margins. We find that the presence of one or more new or established specialty hospitals in a market has a negative effect on general hospital costs and a positive effect on general hospital operating margins. Results, which were consistent across several different modeling approaches, imply that the presence of specialty hospitals encourages greater efficiency on the part of incumbent general hospitals, and the existence of profits attracts market entry. Our findings question the contention that competition from specialty hospitals harms general hospitals financially.

Is the system really the solution? Operating costs in hospital systems

Hospital system formation has recently accelerated. Executives emphasize scale economies that lower operating costs, a claim unsupported in academic research. Do systems achieve lower costs than freestanding facilities, and, if so, which system types? We test hypotheses about the relationship of cost with membership in systems, larger systems, and centralized and local hub-and-spoke systems. We also test whether these relationships have changed over time. Examining 4,000 U.S. hospitals during 1998 to 2010, we find no evidence that system members exhibit lower costs. However, members of smaller systems are lower cost than larger systems, and hospitals in centralized systems are lower cost than everyone else. There is no evidence that the system's spatial configuration is associated with cost, although national system hospitals exhibit higher costs. Finally, these results hold over time. We conclude that while systems in general may not be the solution to lower costs, some types of systems are.

A review of hospital characteristics associated with improved performance

PURPOSE

The objective of this review was to critically appraise the literature relating to associations between high-level structural and operational hospital characteristics and improved performance.

DATA SOURCES

The Cochrane Library, MEDLINE (Ovid), CINAHL, proQuest and PsychINFO were searched for articles published between January 1996 and May 2010. Reference lists of included articles were reviewed and key journals were hand searched for relevant articles.

STUDY SELECTION

and data extraction Studies were included if they were systematic reviews or meta-analyses, randomized controlled trials, controlled before and after studies or observational studies (cohort and cross-sectional) that were multicentre, comparative performance studies. Two reviewers independently extracted data, assigned grades of evidence according to the Australian National Health and Medical Research Council guidelines and critically appraised the included articles. Data synthesis Fifty-seven studies were reported within 12 systematic reviews and 47 observational articles. There was heterogeneity in use and definition of performance outcomes. Hospital characteristics investigated were environment (incentives, market characteristics), structure (network membership, ownership, teaching status, geographical setting, service size) and operational design (innovativeness, leadership, organizational culture, public reporting and patient safety practices, information technology systems and decision support, service activity and planning, workforce design, staff training and education). The strongest evidence for an association with overall performance was identified for computerized physician order entry systems. Some evidence supported the associations with workforce design, use of financial incentives, nursing leadership and hospital volume.

CONCLUSION

There is limited, mainly low-quality evidence, supporting the associations between hospital characteristics and healthcare performance. Further characteristic-specific systematic reviews are indicated.

The financial performance of rural hospitals and implications for elimination of the Critical Access Hospital program

PURPOSE

To compare the financial performance of rural hospitals with Medicare payment provisions to those paid under prospective payment and to estimate the financial consequences of elimination of the Critical Access Hospital (CAH) program.

METHODS

Financial data for 2004-2010 were collected from the Healthcare Cost Reporting Information System (HCRIS) for rural hospitals. HCRIS data were used to calculate measures of the profitability, liquidity, capital structure, and financial strength of rural hospitals. Linear mixed models accounted for the method of Medicare reimbursement, time trends, hospital, and market characteristics. Simulations were used to estimate profitability of CAHs if they reverted to prospective payment.

FINDINGS

CAHs generally had lower unadjusted financial performance than other types of rural hospitals, but after adjustment for hospital characteristics, CAHs had generally higher financial performance.

CONCLUSIONS

Special payment provisions by Medicare to rural hospitals are important determinants of financial performance. In particular, the financial condition of CAHs would be worse if they were paid under prospective payment.

Moving towards culturally competent health systems: organizational and market factors

Cultural competency has been proposed as an organizational strategy to address racial/ethnic disparities in the healthcare system; disparities are a long-standing policy challenge whose relevance is only increasing with the increasing population diversity of the US and across the world. Using an integrative conceptual framework based on the resource dependency and institutional theories, we examine the relationship between organizational and market factors and hospitals' degree of cultural competency. Our sample consists of 119 hospitals located in the state of California (US) and is constructed using the following datasets for the year 2006: Cultural Competency Assessment Tool of Hospitals (CCATH) Survey, California's Office of Statewide Health Planning & Development's Hospital Inpatient Discharges and Annual Hospital Financial Data, American Hospital Association's Annual Survey, and the Area Resource File. The dependent variable consists of the degree of hospital cultural competency, as assessed by the CCATH overall score. Organizational variables include ownership status, teaching hospital, payer mix, size, system membership, financial performance, and the proportion of inpatient racial/ethnic minorities. Market characteristics included hospital competition, the proportion of racial/ethnic minorities in the area, metropolitan area, and per capita income. Regression analyses were conducted to assess the relationship between the CCATH overall score and organizational and market variables. Our results show that hospitals which are not-for-profit, serve a more diverse inpatient population, and are located in more competitive and affluent markets exhibit a higher degree of cultural competency. Our results underscore the importance of both institutional and competitive market pressures in guiding hospital behavior. For instance, while not-for-profit may adopt innovative/progressive policies like cultural competency simply as a function of their organizational goals, linking cultural competency with organizational performance may be essential to attract more profit driven hospitals.

The changing configuration of hospital systems: centralization, federalization, or fragmentation?

PURPOSE

Research on hospital system organization is dated and cross-sectional. We analyze trends in system structure during 2000-2010 to ascertain whether they have become more centralized or decentralized.

DESIGN/METHODOLOGY/APPROACH

We test hypotheses drawn from organization theory and estimate empirical models to study the structural transitions that systems make between different "clusters" defined by the American Hospital Association.

FINDINGS

There is a clear trend toward system fragmentation during most of this period, with a small recent shift to centralization in some systems. Systems decentralize as they increase their members and geographic dispersion. This is particularly true for systems that span multiple states; it is less true for smaller regional systems and local systems that adopt a hub-and-spoke configuration around a teaching hospital.

RESEARCH LIMITATIONS

Our time series ends in 2010 just as health care reform was implemented. We also rely on a single measure of system centralization.

RESEARCH IMPLICATIONS

Systems that appear to be able to centrally coordinate their services are those that operate in local or regional markets. Larger systems that span several states are likely to decentralize or fragment.

PRACTICAL IMPLICATIONS

System fragmentation may thwart policy aims pursued in health care reform. The potential of Accountable Care Organizations rests on their ability to coordinate multiple providers via centralized governance. Hospitals systems are likely to be central players in many ACOs, but may lack the necessary coherence to effectively play this governance role.

ORIGINALITY/VALUE

Not all hospital systems act in a systemic manner. Those systems that are centralized (and presumably capable of acting in concerted fashion) are in the minority and have declined in prevalence over most of the past decade.

Organizing for performance: what does the empirical literature reveal about the influence of organizational factors on hospital financial performance?

This chapter reviews and integrates the empirical literature on the influence of organizational factors on hospital financial performance. Five categories of organizational characteristics that research has addressed are identified and examined as part of the review: ownership, governance, integration, management strategy, and quality. With some exceptions, our review reveals a general lack of consistency and conclusiveness across studies in each area. Exceptions were found in the areas of governance (e.g., physician participation and board processes) and integration (e.g., horizontal system centralization). Despite the lack of conclusive findings across studies, our review suggests substantial opportunities for future work, including opportunities for qualitative and exploratory work. Additional implications for theory and management are discussed.

Predictors of chain acquisition among independent dialysis facilities

OBJECTIVE

To determine the predictors of chain acquisition among independent dialysis providers.

DATA SOURCES

Retrospective facility-level data combined from CMS Cost Reports, Medical Evidence Forms, Annual Facility Surveys, and claims for 1996-2003.

STUDY DESIGN

Independent dialysis facilities' probability of acquisition by a dialysis chain (overall and by chain size) was estimated using a discrete time hazard rate model, controlling for financial and clinical performance, practice patterns, market factors, and other facility characteristics.

DATA COLLECTION

The sample includes all U.S. freestanding dialysis facilities that report not being chain affiliated for at least 1 year between 1997 and 2003.

PRINCIPAL FINDINGS

Above-average costs and better quality outcomes are significant determinants of dialysis chain acquisition. Facilities in larger markets were more likely to be acquired by a chain. Furthermore, small dialysis chains have different acquisition strategies than large chains.

CONCLUSIONS

Dialysis chains appear to employ a mix of turn-around and cream-skimming strategies. Poor financial health is a predictor of chain acquisition as in other health care sectors, but the increased likelihood of chain acquisition among higher quality facilities is unique to the dialysis industry. Significant differences among predictors of acquisition by small and large chains reinforce the importance of using a richer classification for chain status.

Determinants of hospital choice of rural hospital patients: the impact of networks, service scopes, and market competition

Among 10,384 rural Colorado female patients who received MDC 14 (obstetric services) from 2000 to 2003, 6,615 (63.7%) were admitted to their local rural hospitals; 1,654 (15.9%) were admitted to other rural hospitals; and 2,115 (20.4%) traveled to urban hospitals for inpatient services. This study is to examine how network participation, service scopes, and market competition influences rural women's choice of hospital for their obstetric care. A conditional logistic regression analysis was used. The network participation (p < 0.01), the number of services offered (p < 0.05), and the hospital market competition had a positive and significant relationship with patients' choice to receive obstetric care. That is, rural patients prefer to receive care from a hospital that participates in a network, that provides more number of services, and that has a greater market share (i.e., a lower level of market competition) in their locality. Rural hospitals could actively increase their competitiveness and market share by increasing the number of health care services provided and seeking to network with other hospitals.

Hospital Staffing Decisions: Does Financial Performance Matter?

This study assesses the impact of changes in hospitals' financial conditions on changes in hospitals' staffing decisions. The sample consisted of community hospitals operating between 1995 and 2000. The analysis employed a generalized method of moments (GMM) estimator for its dynamic panel data. Cash flow and patient margin were used to measure financial condition. We estimated the effect of changing financial condition on the number of full-time equivalent personnel (FTEs), registered nurses (RNs), and licensed practical nurses (LPNs) per 1,000 adjusted patient days. Our results suggest that declining financial performance led to cutbacks in LPN FTEs per adjusted patient day, but the effects on total hospital FTEs and RN FTEs were mixed.

The effects of the global budget system on cost containment and the quality of care: experience in Taiwan

This study is an attempt to determine whether the implementation of the Global Budget (GB) as a method of health reform has improved cost containment and quality of care in Taiwan. Panel-data analysis is used to investigate cost containment and quality of care in Taipei municipal hospitals before and after the introduction of the GB. The results suggest that there is a trade-off effect. The post-GB data indicate that cost containment comes at the expense of health-care quality. It may, therefore, be the case that policy-makers can more effectively balance cost containment and quality by refining the GB so that reimbursements would be linked to standards of quality. Another way to enhance the reforms would be a more effective monitoring and review system.

Financial indicators for critical access hospitals

CONTEXT

There is a growing recognition of the need to measure and report hospital financial performance. However, there exists little comparative financial indicator data specifically for critical access hospitals (CAHs). CAHs differ from other hospitals on a number of dimensions that might affect appropriate indicators of performance, including differences in Medicare reimbursement, limits on bed size and average length of stay, and relaxed staffing rules.

PURPOSE

To develop comparative financial indicators specifically designed for CAHs using Medicare cost report data.

METHODS

A technical advisory group of individuals with extensive experience in rural hospital finance and operations provided advice to a research team from the University of North Carolina at Chapel Hill. Twenty indicators deemed appropriate for assessment of CAH financial condition were chosen and formulas determined. Issues 1 and 2 of the CAH Financial Indicators Report were mailed to the chief executive officers of 853 CAHs in the summer of 2004 and 1,092 CAHs in the summer of 2005, respectively. Each report included indicator values specifically for their CAH, indicator medians for peer groups, and an evaluation form.

FINDINGS

Chief executive officers found the indicators to be useful and the underlying formulas to be appropriate. The multiple years of data provide snapshots of the industry as a whole, rather than trend data for a constant set of hospitals.

CONCLUSIONS

The CAH Financial Indicators Report is a useful first step toward comparative financial indicators for CAHs.

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.

Hospital organizational change and financial status: costs and outcomes of care in Philadelphia

Two recent changes in Philadelphia-area hospital organizations are consolidation into systems and acquisition of 2 medical school hospitals by a for-profit chain. This study explored whether such consolidation and conversion affected costs and outcomes of care. The analysis included 1,617,581 discharges from 49 acute-care hospitals from 1997 to 1999. Analyses within and between medical school hospitals examined trends in discharges, case mix, length of stay, and mortality. The study addressed 2 questions: whether, as hospitals consolidate into medical school hospital-based systems, volume, severity, length of stay, and mortality increase in those hospitals; and whether for-profit conversion redistributes complex, high-cost admissions to nonprofit hospitals. The 2 medical school hospitals that became for-profit experienced decreases in volume and resource intensity, coupled at one with an increase in severity. However, these patterns were produced more by the system's financial instability than by consolidation or conversion.