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.

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.

Domain of practice and the quality of physician performance

This study has attempted to determine the relationship between physician domain of practice and their quality of medical care. The study examined whether there was a quality difference in practice either 1) between general practitioners and specialists, or 2) between specialists practicing within and outside their specialty domains. The sample consisted of 454 physicians of Hawaii, involving 18 specialty categories: general practitioners (133) and specialists (321). The study finds that when the general practitioners in this study practices without limitation, their quality of care was not as good as that of the specialists. The study also found that when the specialists practiced outside their specialty areas, the relative quality of their performance declined. The latter finding was sustained even when other important practice and background variables were held constant. The study also discusses its generalizability and policy implications.

Factors underlying organizational change in local health care markets, 1982-1995

This article examines the association between characteristics of local health care market areas in 1982 and the penetration of new organizational forms in those markets in 1995. The Northeast and South exhibit less organizational form development than the West. Local markets with higher population size and greater density of specialty physicians in 1982 are associated with greater proportions of the markets being covered by a wide variety of organizational forms in 1995.

Influence of client/colleague dependence on physician performance in patient care

The study has attempted to determine how client/colleague dependence influences medical care received by patients. We have tested physician compliance with standards of care according to the degree to which the practice is visible to, and dependent upon, colleagues. Physician performance is measured in terms of compliance with established professional standards in five areas of practice: 1) the quality of medical care; 2) appropriateness of hospital admissions; 3) appropriateness of length of hospital stay; 2) overstays and 5) understays. The sample consisted of 3316 hospital episodes from 22 general hospitals in the state of Hawaii, and the analysis was conducted via multiple-classification analysis (MCA). Specifically, it was found that from the more colleague-dependent physicians, patients received care with: 1) higher scores on an index of quality of care; 2) more justified admissions; 3) more appropriate lengths of stay; 4) fewer overstays; but 5) more understays. These results remained even after adjusting for a number of physician, client and type-of-practice variables. The findings of this study suggest the significant role that the informal structure of physician practice plays in influencing physician performance. Various sociological implications for control of professional practice are discussed in terms of 1) provision of incentives to encourage an increase in the formalization of otherwise informal physician relationships, and 2) tying formal control mechanisms to informal processes of control.

Antibiotic use and consumption in Freetown, Sierra Leone: A baseline report of prescription stewardship in outpatient clinics of three tertiary hospitals

Objective

As there are no country-representative data on bacterial sensitivities to guide antimicrobial stewardship (AMS) interventions, an AMS programme was established in the outpatient clinics of three tertiary hospitals in Freetown, Sierra Leone.

Methods

The study employed a cross-sectional design to collect antibiotic prescribing data from 370 pregnant women and lactating mothers, 314 children and 229 regular patients in the outpatient clinics of the Princess Christian Maternity Hospital (PCMH), Ola During Children's Hospital and Connaught Hospital (CH), respectively, in April 2022. All data were analysed using Stata Version 16.

Results

Of 913 patients, most were female (n=635, 69.5%), treated at PCMH (n=370, 40.5%) and had a bacterial infection (n=661, 72.4%). The indication for prescribing antibiotics was inappropriate in 252 (27.6%) patients. Of the 1236 prescriptions, 393 (31.8%) were made at CH. The duration of antibiotic use was not stated in 230 (18.6%) prescriptions. Overall antibiotic consumption was 55.3 defined daily doses per 1000 outpatient-days.

Conclusion

Gaps in antibiotic prescriptions were identified in the outpatient clinics of three national referral hospitals in Sierra Leone. In order to combat antimicrobial resistance, AMS interventions are needed to reduce the prescription of antibiotics for inappropriate indications or without specified duration.

Utilization of within-hospital services. A study of the effects of two forms of group practice

This study examined the effect of group affiliation on the use of technical (length of stay, lab tests, etc.) and clinical (rendering and requesting consultations) resources by physicians practicing within a large acute care hospital. Comparisons in use were made between physicians in 1) a prepaid group practice (Colorado Permanente Medical Group [Kaiser]); 2) a fee-for-service group practice; and 3) "unaffiliated" physicians. Patient data were adjusted whenever possible for patient diagnosis and severity. In comparison to other physicians in the hospital, the prepaid group physicians utilized somewhat fewer technical resources, though the results were not statistically significant. Differences in the use of clinical resources were statistically significant, with the fee-for-service group physicians using consulting services the most and prepaid group physicians using them the least. The results indicate that 1) fee-for-service group structures may reinforce the incentives to share in consultation revenues; 2) prepaid group physicians may experience difficulty becoming integrated into the informal structures of physician practice patterns; and 3) the control of groups over the use of technical hospital resources may be substantially weakened when groups do not own or control the hospitals to which they admit their patients.

Professionalism, accountability and peer review

Passage in April 1979 of the new hospital standard on quality assurance by the Joint Commission on Accreditation of Hospitals (JCAH) has given impetus to the development of an expanded literature on the organizational/behavioral aspects of quality assurance. In response to this need for new literature, several conferences on quality assurance were held resulting in the preparation for publication of the four papers included in this special issue of Health Services Research.

This paper presents the general orientation which guided selection of the papers. It suggests that if the health sector is to reconcile professional expectations for autonomy with evolving institutional accountabilities for aggregate quality and cost, there must be 1) an expansion of the domain of professional concern from quality to both cost and quality and 2) the development of explicit mechanisms of control both within and external to health institutions.

Foundations of market restructuring: local hospital cluster and HMO infiltration

Much has been said about the rapid penetration of HMOs. Yet, little attention has been given to another, equally important trend--the consolidation of hospitals into local systems and networks. The number of local hospital clusters has increased significantly in recent years. They are now taking the lead in the majority of markets across the country in forming integrated systems.

Birth order in small multihospital systems

The strategic behaviors of small multihospital systems have received little attention in the literature despite the fact that small systems are the predominant scale among multihospital systems. This study examines one important aspect of small-system strategic behaviors: the birth-order or evolutionary patterns of hospital acquisition. The evolutionary patterns of acquisition are compared across three strategic model types studied elsewhere: local market, investment, and historical. Using data obtained from a variety of sources, local market model systems are found, in the sequence of acquisition, to be significantly different from the other two model types in terms of relative distances of acquisitions from the initiating or parent hospital, the sizes of acquisition hospitals, the complexity of those hospitals, and the likelihood that the acquisitions are located in rural areas. Differences between parents and acquisitions are also significant, as hypothesized, for the market model system types, although they are not generally significant for the other two model types. The findings suggest that the market model represents an important strategic form that may have important implications for the restructuring of hospital markets.

Industry distinctiveness: implications for strategic management in health care organizations

The health care industry is characterized at its core by the requirement that the organization and financing of services recognize the concept of need for health care. This requirement is reflected in industry characteristics of market failure, professional dominance of physicians, and public concern with equal access to care. While market failure is decreasing as a result of the emergence of insurance companies as the "new consumers" of health services, physician dominance and concerns for access continue to be strong. These characteristics mean that successful health care organizations will be local-market focused, decentralized, and tied to community cultures. With regard to training of health services administrators, education should be strengthened in the area of strategy development, with appropriate recognition given to the distinctiveness of the health care industry.

A national study of the efficiency of hospitals in urban markets

Using a sample of 3,000 urban hospitals, this article examines the contributions of selected hospital characteristics to variations in hospital technical efficiencies, while it accounts for multiple products and inputs, and controls for local environmental variations. Four hospital characteristics are examined: hospital size, membership in a multihospital system, ownership, and payer mix (managed care contracts, percent Medicare, and percent Medicaid). Ownership and percent Medicare are consistently found to be related significantly to hospital efficiency. Within the ownership variable, government hospitals tend to be more efficient and for-profit hospitals less efficient than other hospitals. Higher percentages of Medicare payment are negatively related to efficiency. While not consistently significant across all five of the MSA size categories in which the analyses are conducted, possession of managed care contracts, membership in a multihospital system, and size all are consistently related positively to hospital technical efficiency. These variables are also all significant when the hospitals are examined in a combined analysis. Percent Medicaid was not significant in any of the analyses. Implications for policy and the need for methodological work are discussed.

Ownership and organizational performance. A comparison of technical efficiency across hospital types

Using a national data base of urban hospitals, the effect of ownership (government, nonprofit, and for-profit) on the technical efficiency of hospitals was examined. Efficiency scores were computed using a method called data envelopment analysis. Controlling for environmental and hospital characteristics, for-profit hospitals were found somewhat less frequently and government hospitals consistently more frequently in the efficient category. When examining highly inefficient hospitals as a percentage of those receiving inefficient scores, for-profit hospitals appeared to be highly inefficient relative to the other ownership forms. Government and nonprofit hospitals were somewhat indistinguishable from one another regarding their percentages of highly inefficient scores. For-profit hospitals also tended to use supply and capital asset (hospital size) inputs less efficiently, and service and labor inputs more efficiently than hospitals in the other ownership categories.

Group/hospital affiliation: possible barriers to medical staff integration

Group practice administrators are understandably concerned about the drawbacks and the benefits of formal affiliation of their groups with hospitals or other healthcare institutions. An administrator may wonder: "Should we align ourselves with this particular institution at this time?" or "What kinds of formal arrangements should we enter into?" A good administrator is also a good negotiator, and as such, will try to consider and include the opinions of the other participants in actions involving his group. When considering affiliation with an organization, the administrator will try to understand the drawbacks and the benefits as seen from the other side of the fence.

Managing interorganizational dependencies in the new health care marketplace

To survive, let alone thrive, in an increasingly competitive and threatening environment, health care organizations must skillfully manage their dependencies. Such dependencies traditionally have been managed through marketplace exchanges (buying and selling) and ownership relationships (acquisition, merger, and business development). An alternative strategy for designing and managing interorganizational relationships, the quasi-firm, is introduced. The quasi-firm is a hybrid market/ownership arrangement that allows participating organizations to pursue strategically important purposes while simultaneously preserving a high degree of functional and legal autonomy. We suggest that this distinctive interorganizational form is particularly well suited to the features of the new health care marketplace.