The evolution of hospital systems: unfulfilled promises and self-fulfilling prophesies

The superior service based on the highest number of visits and income of Hajj Hospital Surabaya in The National Health Insurance era

Background: A hospitals’ superior service is expected to be of higher value than other available provisions, which consequently differentiates the facility from others, as the branding easily attracts the community attention. The purpose of this study, therefore, is to identify the most needed and profitable health services from existing hospitals.

Design and methods: This was a descriptive research performed with a cross sectional study approach. The variables studied include the number of visits, and revenue based on National Health Insurance (JKN).

Results: Findings show that the polyclinics were the highest number of visits between 2016 and 2017 include Cardiac, Internal Medicine, Medical Rehabilitation, Nerve, General Surgery, and also Dental & Mouth. Conversely, those with the most significant income include Heart, Polyclinics, Dental & Mouth, as well as General Surgery Polyclinics. Moreover, the Medical Rehabilitation and Internal Medicine outpatient installations demonstrated negative INA income, while the already running featured Services in high demand were Heart, Nerve, Dental & Oral, and also General Surgery polyclinics.

Conclusions: In can be concluded that not all polyclinics with high traffic generate positive income, hence it is necessary to monitor and analyze National Health Insurance (JKN) monthly income.

Is there a volume-quality relationship within the independent treatment centre sector? A longitudinal analysis

BACKGROUND

The number of independent treatment centres (ITCs) has grown substantially. However, little is known as to whether the volume-quality relationship exists within this sector and whether other possible organisational factors mediate this relationship. The aim of this study is to gain a better understanding of such possible relationships.

METHODS

Data originate from the Dutch Health and Youth Care Inspectorate (IGJ) and the Dutch Patients Association. We used longitudinal data from 4 years (2014-2017) including three different quality measures: 1) composite of structural and process indicators, 2) postoperative infections, and 3) patient satisfaction. We measured volume by the number of invasive treatments. We adjusted for three important organisational characteristics: (1) size of workforce, (2) chain membership, and (3) ownership status. For statistical inference, random effects analysis was used. We also ran several robustness checks for the volume-quality relationship, including a fractional logit model.

RESULTS

ITCs with higher volumes scored better on structure, process and outcome (i.e. postoperative infections) indicators compared to the low-volume ITCs - although only marginally on outcome. However, ITCs with higher volumes do not have higher patient satisfaction. There is a decreasing marginal effect of volume - in other words, an L-shaped curve. The effect of the intermediating structural factors on the volume-quality relationship (i.e. workforce size, chain membership and ownership status) is less clear. Our findings suggest that chain membership has a negative influence on patient satisfaction. Furthermore, for-profit providers scored better on the Net Promoter Score.

CONCLUSIONS

Our study shows with some certainty that the quality of care in low-volume ITCs is lower than in high-volume ITCs as measured by structural, process and outcome (i.e. postoperative infection) indicators. However, the size of the effect of volume on postoperative infections is small, and at higher volumes the marginal benefits (in terms of lower postoperative infections) decrease. In addition, volume is not related to patient satisfaction. Furthermore, the association between the structural intermediating factors and quality are tenuous.

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.

Change as an Underlying Theme in Professional Service Organizations: An Introduction

This special issue is dedicated to the theme of change within and around the Professional and Human Service Organizations. The introduction points out the ongoing changes in the societal, economic and business environments within which the professions and professional firms are embedded. We suggest that the reality of such environmental changes brings to the fore questions that are important for the research agenda on the professions. Several such issues are raised, like the impact of advanced information technologies, processes of globalization, pressures for business mergers, privatization and more.

The concem here was to explore some of the issues involved with the theme of change in professional and human services. The perspectives taken, and the different conclusions presented, initiate an interesting and important debate on macro-level and firm-level changes in the professions and the 'expert power' underlying them.

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.

The evolution of integrated health care strategies

PURPOSE

To examine the evolution of health care integration strategies and associated conceptualization and practice through a review and synthesis of over 25 years of international academic research and literature.

METHODS

A search of the health sciences literature was conducted using PubMed and EMBASE. A total of 114 articles were identified for inclusion and thematically analyzed using a strategy content model for systems-level integration.

FINDINGS

Six major, inter-related shifts in integration strategies were identified: (1) from a focus on horizontal integration to an emphasis on vertical integration; (2) from acute care and institution-centered models of integration to a broader focus on community-based health and social services; (3) from economic arguments for integration to an emphasis on improving quality of care and creating value; (4) from evaluations of integration using an organizational perspective to an emerging interest in patient-centered measures; (5) from a focus on modifying organizational and environmental structures to an emphasis on changing ways of working and influencing underlying cultural attitudes and norms; and (6) from integration for all patients within defined regions to a strategic focus on integrating care for specific populations. We propose that underlying many of these shifts is a growing recognition of the value of understanding health care delivery and integration as processes situated in Complex-Adaptive Systems (CAS).

ORIGINALITY/VALUE

This review builds a descriptive framework against which to assess, compare, and track integration strategies over time.

Hospital inefficiency: what is the impact of membership in different types of systems?

The primary objective of this study is to assess whether systematic differences in inefficiency are associated with hospital membership in different types of systems. We employed the Battese/Coelli simultaneous stochastic frontier analysis (SFA) technique to estimate hospital cost inefficiency. Mean estimated inefficiency was 8.42%. Membership in different types of systems was related to estimated cost inefficiency (p < .05). Compared to hospitals that were members of centralized health systems, membership in centralized physician/insurance or decentralized systems was associated with decreased inefficiency; membership in independent systems was associated with increased inefficiency.

Patient benefits from participating in an integrated delivery system: impact on coordination of care

BACKGROUND

Although the presumption in health services literature has been that integrated delivery systems (IDSs) should improve the coordination of care, the benefits have not yet been well established through empirical research.

PURPOSES

This study assesses whether receiving care from providers who belong to the same IDS improves patient-perceived coordination of care; concurrently, we develop a new approach for assessing the performance of IDS.

METHODOLOGY/APPROACH

A study was conducted of 222 patients who received primary unilateral total knee arthroplasty at a large IDS' acute care hospital. To isolate the effects of provider membership, we enrolled patients who received surgery from the same surgical department in the same acute care hospital in the IDS. We used baseline and 6-week postoperation patient surveys to assess the impact of the participation of the patients' providers in the IDS on patient-perceived coordination of care.

FINDINGS

We found no consistent effects of IDS membership on patient-perceived coordination of care. Patients with in-network rehabilitation care experienced fewer problems than patients with out-of-network rehabilitation care did, while patients with in-network home care experienced more problems than patients with out-of-network home care did. Membership of a patient's primary care physician had no observed effects.

PRACTICE IMPLICATIONS

Health care managers and administrators need to undertake a realistic examination of the care-coordinating mechanisms that exist in their IDS. This study has shown that the integration of financial, contractual, and administrative processes is not enough to improve care from the patient's perspective; to improve care, it is advised that an IDS take a patient-centered approach in its design and implementation. We discuss potential reasons for uneven integration of IDS, particularly with respect to the lack of coordinating mechanisms, and argue for the usefulness of the approach developed here for assessing IDS performance over time.

Information Technologies in Florida's Rural Hospitals: Does System Affiliation Matter?

CONTEXT

The recent explosive growth of information technology in hospitals promises to improve hospital and patient outcomes. Financial barriers may cause rural hospitals to lag in adoption of information technology, however, formal studies that examine rural hospital adoption of information technology are lacking.

PURPOSE

To determine the extent to which rural Florida hospitals utilize clinical and other information technology applications, to identify related information technology issues and barriers, and to explore differences between stand-alone and system-affiliated hospitals.

METHODS

Chief information officers in rural Florida hospitals were surveyed from June 2003-October 2003. A comprehensive set of questions assessed hospital demographics, information technology priorities and barriers, clinical and other information technology systems, and staffing needs.

FINDINGS

In rural Florida, current information technology priorities included upgrading security on information technology systems to meet Health Insurance Portability and Accountability Act requirements (53.6%), implementing technology to reduce medical errors and to promote patient safety (50.0%), and implementing wireless systems (46.4%). With respect to current information technology adoption, system-affiliated rural hospitals were statistically more likely than their stand-alone counterparts to have laboratory information systems (93% vs 39%), pharmacy (87% vs 46%), pharmacy dispensing (53% vs 8%), chart deficiency (60% vs 15%), and order communication results (60% vs 23%). Financial barriers to successful information technology implementation were noted by 69% of stand-alone and 20% of system-affiliated rural hospitals.

CONCLUSIONS

Although top information technology priorities are similar for all rural hospitals examined, differences exist between system-affiliated and stand-alone hospitals in adoption of specific information technology applications and with barriers to information technology adoption.

Assessing performance of multi-hospital organizations: a measurement approach

PURPOSE

This paper aims to introduces a measure to assess the perceived effectiveness of multi-hospital organizations (MOs).

DESIGN/METHODOLOGY/APPROACH

A sample of top managers of non-profit hospitals serves as the study setting. Data were collected via mail surveys. Usable responses were obtained from 189 hospitals. The measure was developed by considering the instrumentality and effect components of a set of relevant motives for joining an MO. During the course of the study, three alternative formulations were examined.

FINDINGS

Results show that the measures based on effect alone and a multiplicative combination of effect and instrumentality demonstrate sound psychometric properties. The recommendation here is to adopt the latter measure.

RESEARCH LIMITATIONS/IMPLICATIONS

The study was limited to a particular sample. Replications among other samples are needed to validate the current findings. Also, because the exact content of the objective function of a hospital for joining an MO is not necessarily constant over time, there is a need to conduct similar studies on a periodic basis.

PRACTICAL IMPLICATIONS

The measure recommended here uses multiplicative/weighted instrumentality and effect scores as opposed to only the instrumentality or effect scores. This makes it possible to go beyond the mere "why" or "how" questions. Simultaneous consideration of instrumentality and effect dimensions affords a richer and more relevant understanding.

ORIGINALITY/VALUE

Valid and reliable measures of performance are critical for both managerial and research purposes. The measure proposed in the current study could be used in structural equation models to investigate the effect of individual actions on performance and the impact of performance on other outcome measures (e.g. intentions to stay in an MO).

Cost structure of osteopathic hospitals and their local counterparts in the USA: Are they any different?

Due to the emphasis on preventive care and less invasive solutions to medical problems, osteopathic hospitals may deliver cost efficient and cost effective care. This study examines the cost structure of osteopathic hospitals and compares their performance to a local control group selected from allopathic hospitals. Osteopathic hospitals are identified in the 1999 American Hospital Association (AHA) data and matched to local allopathic hospitals with respect to location, bed size, system, for-profit and teaching status. Cost functions are estimated for both groups of hospitals, and significant differences in input, output and costs are highlighted. Results show that osteopathic hospitals are more costly and less productive in comparison to their counterparts. Inefficient production of outpatient services and high cost of medical education are two reasons for the poor performance. The study has important policy implications on two fronts: first, osteopathic hospitals are more costly to operate than their counterparts, and subsequently this requires further analysis of the osteopathic treatments and techniques. In an environment where health care revenues are shrinking and costs are rising, this is probably much needed information for osteopathic hospitals. Secondly, there is an emerging concern among osteopathic medical schools and osteopathic physicians due to the declining number of osteopathic hospitals, which translates to a smaller number of residency positions for osteopathic medical school graduates. Analyzing cost, input and output variables reveal some of the contributing factors to the decline of osteopathic hospitals and help preserve this rich tradition.

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.

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.

Managed care arrangements of health networks and systems. A review of the 1999 experience

The 1990s witnessed various health provider efforts to integrate health care delivery with financing functions. Physician and hospital-led organizations developed their own insurance products and also contracted on a capitated or shared-risk basis with health maintenance organizations (HMOs). Several studies exist on the efforts of physician-led health organizations in these areas, but few studies exist on hospital-led organizations. We examined unique data on hospital-led health networks and systems for 1999 and found that about 60% had provider-owned insurance products and 50% held capitated contracts for their affiliates. In addition, these hospital-led organizations--especially health systems--had comparable levels of capitated contracting when compared to physician-led organizations. Although interest in capitation has waned, current economic realities may reignite interest in these arrangements given their potential for containing health expenditures without increasing consumer risk. In light of this, it is now a good time for physicians and medical group managers to reflect on their experiences in the 1990s and to assess the merits and shortcomings of different intermediary organizations with which they may align.

Governance forms in health systems and health networks

Debates about the relative advantages of health systems versus more loosely structured health networks have largely ignored issues of how these different organizational forms are governed. Based on comparisons of two large samples of health systems and health networks, our findings indicate that the majority of both types of organized delivery systems have governing bodies separate from those of affiliate organizations, high proportional representation by affiliate organizations, and similar board size.

Corporate culture: the missing piece of the healthcare puzzle

The U.S. healthcare system requires radical, not incremental, change. Management issues in healthcare delivery are fundamentally different from those in the business world. Systems thinking forces a focus on corporate culture, about which there is little hard data. The use of cost/benefit analysis suffers from the lack of any accepted measure of long-term "benefit." The authors make four observations: (1) corporate culture is both part of the cause and part of the cure for healthcare; (2) long-term financial and functional measures are necessary to make evidence-based decisions; (3) valid, nationwide data must be developed regarding the corporate culture of medicine; and (4) direct (unmodified) application of management theory or practices will not achieve sustainable improvements.

Market and efficiency-based strategic responses to environmental changes in the health care industry

This study examined the linkages between perceived environmental changes in the health care industry, corresponding strategic adaptations, and their impact on select performance measures as reported by managers. Results from a sample of 187 hospitals indicate that efficiency-oriented strategy is chosen more often by organizations that perceive their industry environment to be relatively stable and certain while market-focused strategies are chosen more often by organizations that perceive greater environmental instability and uncertainty.

Rural hospitals: trends, challenges, and a future research and policy analysis agenda

Previous reviews of the status of rural hospitals conclude that rural hospitals play a major role in ensuring the provision of health services in rural areas, are an essential part of the social and economic identity of rural communities, have had mixed success in their ability to respond to environmental threats, and are very sensitive to public policies due, in part, to their small size. The evolving hospital paradigm in the United States and a turbulent economic and health care environment have created an uncertain future for the rural hospital. Hospitals are being forced to shift their emphasis from filling acute inpatient care beds to providing a more diversified set of services through linkages with other institutions and provider groups. This presents challenges for rural hospitals, which often serve as the foundation for health care delivery in rural communities yet struggle to overcome the effects of troubled local economies, shortages of health professionals, and public policy inequities. This article reviews key trends and challenges facing rural hospitals from the perspective of their structure and organization, financial sustainability, quality of care provided, and strategic linkages with other entities. It concludes with the presentation of a research and policy analysis agenda that addresses the feasibility of the role of the rural hospital as the hub or coordinator of the rural health care delivery system, the fiscal viability of the rural hospital in the post-Balanced Budget Act period, strategies for measuring and improving the quality of care provided by rural hospitals, and the structure and value of horizontal and vertical linkages of rural hospitals.

Integrated delivery networks: a detour on the road to integrated health care?

This paper reviews the rationales and evidence for horizontal and vertical integration involving hospitals. We find a disjunction between the integration rationales espoused by providers and those cited in the academic literature. We also generally find that integration fails to improve hospitals' economic performance. We offer seven lessons from hospitals' efforts to integrate and then suggest four alternative models for achieving integrated delivery of health care services.

Strategies for more efficient performance through hospital merger

This article compares the operating performance of merged and non-merged local hospitals during the late 1980s and early 1990s, a period not unlike that being experienced in hospitals today. A matched case-control design is employed to create "synthetically" merged hospitals--to represent them as if they had effected a merger--and compares their performance to a group of similar hospitals that did merge.

Productive efficiency of rural health clinics: the Midwest experience

This article identifies the characteristics of efficient and inefficient rural clinics in the Midwest, using 1994 Medicare cost reports. Rural health clinics are compared on the basis of productive efficiency by estimating a nonparametric frontier. Six inputs and five output categories were employed to estimate an efficient frontier. The results show that an efficient clinic, on average, employs approximately 1.5 more physicians than an inefficient clinic and incurs capital expenses more than twice those of the inefficient clinic. Future rural clinics are expected to be larger, employing more capital and labor to take advantage of scale economies. However, given the steady (or decreasing) population of rural communities, the expansion of relatively small rural clinics could involve forming rural health care systems and/or networks in close proximity to create synergies from scale economies, staff recruitment, easier access to capital, shared information systems, improved mobility of physicians among several clinics and savings from management costs.

Rural hospitals and the adoption of managed care strategies

This research examined the performance of rural hospitals engaged in different levels of managed care activities and identified factors related to performance and competition that affected rural hospitals' likelihood of pursuing managed care as a strategy. The sample studied consisted of 139 rural hospitals in Iowa and Nebraska. Results showed that a relatively high percentage of hospitals were engaged in managed care activities, mainly through contractual arrangements. The study found that high competition in the marketplace increased the likelihood of hospitals pursuing managed care strategies, while high demand markets had a negative association with the likelihood of pursuing a managed care strategy. No significant relationship was detected between poor performance and pursuing a managed care strategy.

Managed care, vertical integration strategies and hospital performance

OBJECTIVE

The purpose of this study is to examine the association of managed care with hospital vertical integration strategies, as well as to observe the relationships of different types of vertical integration with hospital efficiency and financial performance.

DATA AND METHODS

The sample consists of 363 California short-term acute care hospitals in 1994. Linear structure equation modeling is used to test six hypotheses derived from the strategic adaptation model. Several organizational and market factors are controlled statistically.

PRINCIPAL FINDINGS

Results suggest that managed care is a driving force for hospital vertical integration. In terms of performance, hospitals that are integrated with physician groups and provide outpatient services (backward integration) have better operating margins, returns on assets, and net cash flows (p < 0.01). These hospitals are not, however, likely to show greater productivity. Forward integration with a long-term-care facility, on the other hand, is positively and significantly related to hospital productivity (p < 0.001). Forward integration is negatively related to financial performance (p < 0.05), however, opposite to the direction hypothesized.

CONCLUSIONS

Health executives should be responsive to the growth of managed care in their local market and should probably consider providing more backward integrated services rather than forward integrated services in order to improve the hospital's financial performance in today's competitive health care market.

Networks and the fiscal performance of rural hospitals in Oklahoma: are they associated?

This paper uses regression analysis to explore the relation of network membership to the financial performance of rural hospitals in Oklahoma during fiscal year 1995. After adjusting for the scope of service, as measured by the number of facilities or services offered by the hospital, indicators of fiscal status are (1) the cash receipts derived from net patient revenue; (2) the cash disbursements related to operating costs, net of interest and depreciation expense, labor costs and nonlabor costs; and (3) net cash flow, defined as the difference between cash receipts and disbursements. Controlling for the effects of the hospital's structural attributes, operating characteristics and market conditions, the results indicate that members of a network reported lower net operating costs, labor costs and nonlabor expenses per service than nonmembers. Hence, the analysis seems to suggest that the membership of rural hospitals in a network is associated with lower cash disbursements and an improved net cash flow, outcomes that may preserve their fiscal viability and the access of the population at risk to service.

Management of integrated delivery systems in the next decade

In an attempt to find some remedies within what is already a highly competitive and politically charged environment, this article's purpose is to specify some major steps that the management of integrated delivery systems might heed in the next decade to curtail their expenditures and better position themselves for the future.

Community control and pricing patterns of nonprofit hospitals: An antitrust analysis

Traditional control of nonprofit hospitals by the communities they serve has been offered as justification for restraining antitrust enforcement of mergers that involve nonprofit hospitals. The community is arguably a constraint on a nonprofit's inclination to exercise market power in the form of higher prices; however, community control is likely to be attenuated for hospitals that through merger or acquisition become members of hospital systems--particularly those that operate on a regional or multiregional basis. We report findings from a study in which we examined empirically the relationship between market concentration and pricing patterns for three types of nonprofit hospitals that are distinguishable based on degree of community control: an independent hospital, a member of a local hospital system, and a member of a nonlocal hospital system. Study results indicated that when conditions existed to create a more concentrated market, (1) all three types of nonprofit hospitals exercised market power in the form of higher prices, and (2) hospitals that were members of nonlocal systems were more aggressive in exercising market power than were either independent or local system hospitals. The results have important implications for antitrust enforcement policy.

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.

Vertical systems integration

Healthcare organizations are vertically integrating into systems for operational, economic, and quality incentives. These system transformations require that the nurse executive assume new roles, responsibilities, and skills. The authors review the trends in system integration and discuss implications for nurse administrators based on literature and structured interviews with nurse executives who have experience in integrated systems or who are engaged in integrated system planing and 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.

Medicare physician payment reform. An introduction to the new fee system and its implications for hospitals

Set to go into effect on October 1, the new Medicare physician-reimbursement system attempts to bring Medicare payments ever closer in line with physicians' actual costs. Among other things, the new fee schedule should eventually reduce the disparity between specialty and family-practice physicians' reimbursements and encourage more med students to enter primary care. Hospitals should be aware, however, that some things--like conflict between their and physicians' financial incentives--will not change.

Measuring and evaluating the performance of vertically integrated rural health networks

The growing interest in health care networks is extraordinary given the lack of a common understanding of what networks are and what they can accomplish. The purpose of this article is to develop a conceptual approach to the study of vertically integrated rural health networks. This article provides a network typology, a framework for assessing network performance, and examples of measurable performance indicators. It concludes with a description of the salient research questions that need to be addressed concerning the relationships between the environment, structure, and performance of vertically integrated rural health networks.

Regionalization of health services in Canada: a critical perspective

Since the introduction of universal health insurance in Canada in the late 1960s, the federal and provincial governments have been concerned with cost savings, efficiency of service delivery, equity in service provision, enhanced citizen participation, and increased accountability of decision-makers. A plethora of government royal commissions and task forces have recommended a similar range of options for addressing these concerns. Central to the reforms has been a proposed regionalized health system with an intermediary body responsible for functions previously assigned to local or central structures. For its supporters, regionalization offers a means of better coordinating and integrating health care delivery and controlling expenditures, and promises a more effective provision of services and an avenue for citizen participation in health care decision-making. All provincial governments except Ontario have introduced regional structures for health care, with the hope that these changes will increase efficiency, equity, and responsiveness. However, despite the alleged benefits, regionalization presents significant challenges. It faces obstacles to integrating and coordinating services in a manner that produces economies of scale; it requires an enhanced level of information that may be difficult to achieve; it is unlikely to involve citizens in health care decision-making; and it may actually lead to increased costs.

Organizational diversification in the American hospital

This paper outlines a conceptual framework of organizational diversification and assesses the state of empirical research on hospital organizational change. The literature on economic organization of hospitals, one of the most developed branches of health services research, still has only weak ties to economic theory. Evolving physician-hospital organizations do not fit into existing frameworks based on horizontal integration, vertical integration, or diversification. Empirical research has primarily focused on horizontal integration, and cause-effect relationships are often obscured by models that depart from economic theory and lack controls for self-selection bias. Recent empirical studies indicate that hospital mergers had moderate, rather than dramatic, effects on the rate of change in operating costs, staffing, and scale. Mergers rarely resulted in hospital closure, but were as likely to result in acute care consolidation and restructuring as in conversion to non-acute inpatient uses. While administrative costs were higher in for-profit than non-profit system hospitals, total costs were similar. System hospitals had lower marginal and average costs per stay than independent hospitals. Hospital vertical integration into subacute care was largely an artifact of the governmental uniform pricing system, which encouraged vertical integration. Hospitals that shared governance or financial risks with physicians outperformed those with high levels of physician governance and financial integration (e.g. stock ownership). Formal physician-hospital organizational arrangements often served to coordinate managed care contracting or to forge links with primary care group practices. Hospital diversification into related services improved short-term financial performance over unrelated diversification, although long-term performance was similar.

Integrating learning into integrated delivery systems

Integrated delivery systems that promote learning and flexibility will be better prepared to face the challenges imposed by a complex and competitive environment. The integration of learning into these systems requires a shared vision, facilitative leadership, and highly functioning communication channels within an organic structure. Strategies that promote positive attitudes toward change are necessary for learning as is the provision of resources, training, incentives, and rewards that support learning, and feedback on how new administrative and clinical practices advance the mission and goals of the system.

Pure versus hybrid: performance implications of Porter's generic strategies

This article identifies the strategic types in the hospital industry based on the hospital's use of Porter's generic strategies in their pure and hybrid forms. The article also examines differences in performance of hospitals across strategic types. Results indicate that hospitals that follow a focussed cost leadership strategy, in general, have superior performance on a variety of performance measures, while hospitals that use a combination of cost leadership and differentiation perform the poorest. Implications of findings for hospital administrators are also discussed.

Managed care, market stages, and integrated delivery systems: is there a relationship?

This DataWatch evaluates four-stage models of market evolution developed initially by the University HealthSystem Consortium (UHC). Such models suggest that increasing health maintenance organization (HMO) penetration is linked with increases in hospital consolidation and vertical integration between physicians and hospitals. These claims are tested using national data for 1992-1995. Results suggest that such models accurately classify the markets of UHC member hospitals according to their levels of HMO penetration only. Moreover, they do not discern evolutionary stages of market development and may not be generalizable to the markets of non-UHC member hospitals. Researchers and policymakers should exercise caution in applying such models.

Strategic hospital alliances: impact on financial performance

Acute care hospitals have increasingly been forming local strategic hospital alliances (SHAs), which consume considerable resources in forming and may affect the competitiveness of provider markets. This research shows that SHAs and market factors, which have been perceived to be threats to hospitals, are related to hospitals' financial performance. Among the findings are that SHA members have higher net revenues but that they are not more effective at cost control. Nor do the higher net revenues result in higher cash flow. However, increasing SHA penetration in a market is related to lower net revenues per case. In addition, the penetration of private health maintenance organizations in markets is associated with lower revenues and expenses.

Hospital restructuring in the United States, Canada, and Western Europe: an outcomes research agenda

OBJECTIVES

This article describes the extent and nature of hospital restructuring across the United States, Canada, and Western Europe, countries with differently organized and financed health-care systems, and assesses the feasibility of international research on the outcomes of hospital restructuring.

METHODS

The conceptual background, context, and focus for the Bellagio conference on Hospital Restructuring in North America and Western Europe held in November 1996 is provided, illustrating key issues on hospital and workforce trends using the US data with international comparisons.

RESULTS

Hospital systems internationally are undertaking very similar restructuring interventions, particularly ones aimed at reducing labor expenses through work redesign. Nursing has been a prime target for work redesign, resulting in changes in numbers and skill mix of nursing staff as well as fundamental reorganizing of clinical care at the inpatient unit level. Yet little is known about the outcomes of such organizational interventions and there are few efforts in place to critically evaluate these actions.

CONCLUSIONS

Restructuring of the hospital workforce and redesign of work in inpatient settings is widespread and markedly similar across North American and Europe, and warrants systematic study. Cross-national studies of the impact of restructuring inpatient care on patient outcomes would yield valuable lessons about the cost-quality tradeoffs in hospital redesign and re-engineering, as well as inform national planning about the numbers and types of nurses needed in the coming decades.