Strategic integration of hospitals and physicians

A striking development in the healthcare market place has been the formation of strategic relationships between hospitals and physicians. Hospital-physician integration appears to be a response to rapidly expanding managed care health insurance. We examine whether integration lead to efficiency gains from transaction cost economies thereby allowing providers to offer managed care insurance plans lower prices or whether integration is really a strategy to improve bargaining power and thereby increase prices. We find that integration has little effect on efficiency, but is associated with an increase in prices, especially when the integrated organization is exclusive and occurs in less competitive markets.     

Dynamic diversification: hospitals pursue physician alliances, 'seamless' care.

In the 1980s, "diversification" in health care meant creating new corporate entities to boost revenues. In the 1990s, in places like New Ulm, MN, Long Beach, CA, and Boston, hospitals and physicians are exploring diversifications that utilize their core patient care strengths. This is creating new entities that benefit patient care and help prepare for health care delivery in the future. In fact, despite predictions that RBRVS would drive physicians into competition with hospitals, the opposite is taking place, as the new "seamless" delivery systems take advantage of pooled resources and economies of scale.     

Economies of scale in non-revenue producing cost centers: implications for hospital mergers

This paper uses semiparametric methods to estimate the magnitude of economies of scale in 14 non-revenue producing cost centers in hospitals. There are substantial economies of scale in small hospitals, but economies are exhausted in hospitals with over 10,000 discharges annually. In recent hospital mergers challenged by federal antitrust agencies, one or both hospitals had over 10,000 discharges, suggesting that efficiency gains in non-revenue producing cost centers will be small, and could easily be offset by nominal price increases.     

Economies of scale and scope in Vietnamese hospitals

Hospitals consume a large share of health resources in developing countries, but little is known about the efficiency of their scale and scope. The Ministry of Health of Vietnam and World Bank collected data in 1996 from the largest sample ever surveyed in a developing country. The sample included 654 out of 815 public hospitals, six categories of hospitals and a broad range of sizes. These data were used to estimate total variable cost as a function of multiple products, such as admissions and outpatient visits. We report results for two specifications: (1) estimates with a single variable for beds and (2) estimates with interaction terms for beds and the category of hospital. The coefficient estimates were used to calculate marginal costs, short-run returns to the variable factor, economies of scale, and economies of scope for each category of hospital. There were important differences across categories of hospitals. The measure of economies of scale was 1.09 for central general and 1.05 for central specialty hospitals with a mean of 516 and 226 beds, respectively, indicating roughly constant returns to scale. The measure was well below one for both provincial general and specialty hospitals with a mean of 357 and 192 beds, respectively, indicating large diseconomies of scale. The measure was 1.16 for district hospitals and 0.89 other ministry hospitals indicating modest economies and diseconomies of scale, respectively. There were large economies of scope for central and provincial general hospitals. We conclude that in a system of public hospitals in a developing country that followed an administrative structure, the variable cost function differed significantly across categories of hospitals. Economies of scale and scope depended on the category of the hospital in addition to the number of beds and volume of output.     

Estimating hospital costs with a generalized Leontief function

This paper estimates a long-run hospital cost function with multiple outputs and inputs using a panel data set from Washington State hospitals during 1988-1993. We find that with our data the generalized Leontief function is more appropriate than a translog for estimating hospital cost functions. With respect to hospital costs, we find that hospitals readily adjust the use of intermediate products. Radiology, therapies and surgery, and other inpatient days, all serve as substitutes for core inpatient days. Outpatient services are found to be complementary to core inpatient services, indicating that the growth of stand-alone outpatient clinics might increase the costs of providing healthcare services. Our analysis finds that hospitals show significant economies of scale, but there is a limited amount of evidence of scope economies. Also, there is some evidence that profit-seeking hospitals achieve some of their goals by controlling costs, and that diagnostically related groups (DRG)-based Medicare services are effective in getting hospitals to control costs.     

Potential gains from hospital mergers in Denmark

The Danish hospital sector faces a major rebuilding program to centralize activity in fewer and larger hospitals. We aim to conduct an efficiency analysis of hospitals and to estimate the potential cost savings from the planned hospital mergers. We use Data Envelopment Analysis (DEA) to estimate a cost frontier. Based on this analysis, we calculate an efficiency score for each hospital and estimate the potential gains from the proposed mergers by comparing individual efficiencies with the efficiency of the combined hospitals. Furthermore, we apply a decomposition algorithm to split merger gains into technical efficiency, size (scale) and harmony (mix) gains. The motivation for this decomposition is that some of the apparent merger gains may actually be available with less than a full-scale merger, e.g., by sharing best practices and reallocating certain resources and tasks. Our results suggest that many hospitals are technically inefficient, and the expected “best practice” hospitals are quite efficient. Also, some mergers do not seem to lower costs. This finding indicates that some merged hospitals become too large and therefore experience diseconomies of scale. Other mergers lead to considerable cost reductions; we find potential gains resulting from learning better practices and the exploitation of economies of scope. To ensure robustness, we conduct a sensitivity analysis using two alternative returns-to-scale assumptions and two alternative estimation approaches. We consistently find potential gains from improving the technical efficiency and the exploitation of economies of scope from mergers.     

Concentrating Emergency Rooms: Penny‐Wise and Pound‐Foolish? An Empirical Research on Scale Economies and Chain Economies in Emergency Rooms in Dutch Hospitals

In this paper, we address the issue of whether it is economically advantageous to concentrate emergency rooms (ERs) in large hospitals. Besides identifying economies of scale of ERs, we also focus on chain economies. The latter term refers to the effects on a hospital's costs of ER patients who also need follow‐up inpatient or outpatient hospital care. We show that, for each service examined, product‐specific economies of scale prevail indicating that it would be beneficial for hospitals to increase ER services. However, this seems to be inconsistent with the overall diseconomies of scale for the hospital as a whole. This intuitively contradictory result is indicated as the economies of scale paradox. This scale paradox also explains why, in general, hospitals are too large. There are internal (departmental) pressures to expand certain services, such as ER, in order to benefit from the product‐specific economies of scale. However, the financial burden of this expansion is borne by the hospital as a whole. The policy implications of the results are that concentrating ERs seems to be advantageous from a product‐specific perspective, but is far less advantageous from the hospital perspective. © 2016 The Authors. Health Economics Published by John Wiley & Sons, Ltd.     

福建省县级综合性公立医院运行效率变化分析

目的:研究福建省40家县级综合性公立医院的综合效率、技术效率和规模效率变化情况,以及全要素生产率随着时间变化的情况,为提高县级综合性公立医院运营效率提供决策依据和参考。方法:收集2009—2014年福建省40家县级综合性公立医院运营相关数据,运用数据包络分析法(DEA)的CCR、BCC和Malmquist模型进行分析。结果:40家县级综合性公立医院中绝大多数处于规模递减状态,2009—2014年的全要素生产率为1.019,21家(52.5%)医院生产率有所提高,其中3家医院生产率提高是由于技术进步,3家是由于效率提高,15家是由于技术进步和效率提高共同作用。结论:福建省县级综合性公立医院效率总体不足,且不同地区医院运行效率有差异,山区医院效率有所提高,沿海地区医院效率出现下降。因此,政府在加大对县级综合性公立医院投入时,应采取差别化政策,注意合理控制医院规模,同时应加强内涵建设,重视医疗技术的提升。     

Does competition improve hospital performance: a DEA based evaluation from the Netherlands

Many countries have introduced competition among hospitals aiming to improve their performance. We evaluate the introduction of competition among hospitals in the Netherlands over the years 2008–2015. The analysis is based on a unique longitudinal data set covering all Dutch hospitals and health insurers, as well as demographic and geographic data. We measure hospital performance using Data Envelopment Analysis and distinguish three components of competition: the fraction of freely negotiated services, market power of hospitals, and insurer bargaining power. We present new methods to define variables for each of these components which are more accurate than previously developed measures. In a multivariate regression analysis, the variables explain more than half of the variance in hospital efficiency. The results indicate that competition between hospitals and the relative fraction of freely negotiable health services are positively related to hospital efficiency. At the same time, the policy measure to steadily increase the fraction of health services contracted in competition may well have resulted in a decrease in hospital efficiency. The models show no significant association between insurer bargaining power and hospital efficiency. Altogether, the results offer little evidence that the introduction of competition for hospital care in the Netherlands has been effective.

     

Measuring economies of scale at the city market level

Data envelopment analysis (DEA) techniques have been applied to the assessing efficiency and productivity among individual hospitals. In this article, we employ DEA to address whether economies of scale exist among hospital markets by first assessing individual hospitals operating in 2005 in the State of Florida and then by comparing hospital markets' efficiency relative to each other. The interest in hospital markets stems from issues relating to mergers among hospitals or the reallocation of services (inputs) among hospitals in a market area, particularly as occupancy rates and reimbursements are tending to fall. Facing more competition and stringent financial conditions, hospitals would benefit from decreasing costs by exploiting economies of scale.     

How to detect hospitals where quality would not be jeopardized by health cost savings? A methodological approach using DEA with SBM analysis

BackgroundIn Spain the health care cuts have been the norm after the international economic crisis. The aim of this study is fourfold: (1) to measure hospital performance analysing two different perspectives: technical efficiency and quality; (2) to determine how technically efficient hospitals operate when faced with undesirable production; (3) to determine whether a potential trade-off between efficiency and quality exists or not; and (4) to propose a methodology to detect which hospitals could reduce their running costs without jeopardizing the quality of the services provided. Budget cutbacks imposed in Spain should focus solely on these hospitals, unless an increase in undesirable production is considered acceptable.MethodsIn this paper a SBM (slacks-based measure) of efficiency model is employed incorporating undesirable outputs using the case-mix adjusted deaths of patients. The study is carried out using information from 232 general hospitals in Spain.FindingsWe find four different groups of hospitals based on the relationship between efficiency and undesirable outputs.ConclusionWe show that undesirable outputs affect the measurement of technical efficiency, proposing a tool that allows the identification of hospitals where efficiency can be increased, that is, where budget cuts and/or more production outputs can be implemented without necessarily increasing the undesirable output.     

Changes in hospital efficiency after privatization

We investigated the effects of privatization on hospital efficiency in Germany. To do so, we obtained bootstrapped data envelopment analysis (DEA) efficiency scores in the first stage of our analysis and subsequently employed a difference-in-difference matching approach within a panel regression framework. Our findings show that conversions from public to private for-profit status were associated with an increase in efficiency of between 2.9 and 4.9%. We defined four alternative post-privatization periods and found that the increase in efficiency after a conversion to private for-profit status appeared to be permanent. We also observed an increase in efficiency for the first three years after hospitals were converted to private non-profit status, but our estimations suggest that this effect was rather transitory. Our findings also show that the efficiency gains after a conversion to private for-profit status were achieved through substantial decreases in staffing ratios in all analyzed staff categories with the exception of physicians and administrative staff. It was also striking that the efficiency gains of hospitals converted to for-profit status were significantly lower in the diagnosis-related groups (DRG) era than in the pre-DRG era. Altogether, our results suggest that converting hospitals to private for-profit status may be an effective way to ensure the scarce resources in the hospital sector are used more efficiently.     

Resource constraints and strategic change in a public hospital system.

It has been suggested that strategic management in public services tends to be oriented towards preserving and perpetuating current patterns of service provision, rather than changing priorities. However, faced with severe resource constraints combined with growing demand and rapidly developing technology, public hospitals in Canada have come under increasing pressure. Based on an empirical study of strategic management and change in 32 Montreal hospitals, this paper examines the relationship between financial adversity and the extent and nature of strategic change in these organizations. Strategic change indicators considered in the study include overall product mix, product diversity, product complexity, market demographics, efficiency, and revenue diversification. Results suggest that resource constraints have indeed stimulated changes within these organizations. In particular, hospitals suffering more severe financial difficulties have reduced their size and focused on a narrower range of services. Moreover, there is evidence that greater complementarity has been achieved among the entire sample of hospitals.     

Assessing performance of Taiwan hospitals using data envelopment analysis: In view of ownership

With rapid economic development in Taiwan, people have greater awareness of health care and are paying more attention to it. From the perspective of hospital management, the scale of hospitals and efficiency improvement are of concern to hospital managers. However, the extent of efficiency will differ between public and private hospitals due to their different ownership and goals. The study aims to evaluate the efficiency of public and private hospitals and to investigate the influence of ownership on efficiency of hospitals. The differences between hospitals can be understood by analyzing the features of the organization of hospitals and their geographic environment. In this way, hospitals with relatively low efficiency will be able to make improvements based on concrete evidence. By means of the two‐stage method, the efficiency scores of 182 hospitals in Taiwan are compared. In the first stage, the data envelopment analysis is applied to obtain the efficiency scores of hospitals. The results show that private hospitals are more efficient than public hospitals. In the second stage, Tobit regression is used to investigate the factors influencing efficiency obtained by the data envelopment analysis. The results indicate that there are differences between ownership in market competition and the average length of stay.     

Measuring the Performance of Critical Access Hospitals in Missouri Using Data Envelopment Analysis

Purpose: Rural hospitals are critical for access to health care, and for their contributions to local economies. However, many rural hospitals, especially critical access hospitals (CAHs) need to strive for more efficiency for continued viability. Routinely evaluating their performance, and providing feedback to management and policy makers, is therefore important. Method: Three measures of relative efficiency are estimated for CAHs in Missouri using an Input‐oriented Data Envelopment Analysis with a variable returns to scale assumption and compared with the efficiency of other rural hospitals in Missouri using Banker's F‐test. Using 30‐day readmission rate as a measure of quality, CAHs are evaluated against efficiency‐quality dimensions. Findings: CAHs in Missouri had a slight decline in average technical efficiency, but they had a slight gain in average cost efficiency in 2009 compared to 2006. More than half of the CAHs were neither economically nor technically efficient in both years. The relative efficiency of other rural hospitals was statistically higher than that of CAHs in Missouri. Conclusions: This study validates the finding of relative inefficiency of CAHs compared to other hospitals paid under the Prospective Payment System at a state level (Missouri). However, with considerable variation in socioeconomic as well as health care access indicators across states, a relative efficiency frontier may not be the only relevant indicator of value for the evaluation of the performance of CAHs. Access to health care and the impact on the local economy provided by these CAHs to the community are also critical indicators for more comprehensive performance evaluation.     

The effect of urban hospital closure on markets

We measure the effect of urban hospital closure on the operating efficiency of the remaining hospitals in the local market. Closure of a hospital other than the least efficient can be detrimental to social welfare because treatment costs will be higher at surviving hospitals. The results show that hospital closure has led to an evolutionary increase in efficiency in urban markets. The hospitals that closed were less efficient at baseline, and after closure their competitors realized lower costs per adjusted admission through an increase in inpatient admissions and emergency room visits. Overall, we estimate that costs per adjusted admission declined by 2-4% for all patients and about 6-8% for patients who would have been treated at the closed hospital.     

Strategic acquisitions by academic medical centers: the Jefferson experience as operational paradigm

As capital investments in the health care industry have changed in popularity, mergers and acquisitions of and by hospitals have created supersystems of health care that are based on the assumption that economies of scale offer greater protection from a variety of forces. The acquisition of West Park (Jefferson Park) Hospital by Thomas Jefferson University and the infusion of Jefferson management into Methodist Hospital have provided the institution with unique opportunities to broaden its population base for acute care admissions and to permit greater diversification within the entire health care market.     

Vertical integration and contracting-out in generic hospital services in Spain

Objectives: This study examines the factors that influence make or buy decisions corresponding to four generic services (housekeeping, laundry, food services, and maintenance and security) in Spanish hospitals (3,160 transactions in 790 hospitals).Methods: The empirical estimation of a logistic model based on hospital utility maximization is presented. Factors included in the model are not only those related to transaction costs, but also those related to public intervention and the political dimension.Results: A total of 55.7% of hospitals contracted-out at least one of the generic services. The services most frequently contracted-out were housekeeping and maintenance and security(45.1 and 32.5%, respectively). In contrast, the services (94.3% and 80.1%, respectively). Hospital size (economies of scale), measured by the number of beds, was one of the most important factors influencing make or buy decisions.Conclusions: We find evidence that economies of scale are related to a higher level of vertical integration, while specialization and for-profit objectives favor the decision to contract-out. The choice of organizational model for laundry services presents a different pattern from that of the other three services. Empirical results show that some asset specificity could be present in laundry services.     

医疗服务生产的规模经济性分析

根据规模经济理论,对医疗服务生产在服务项目和医院等层次上进行了规模经济性分析,指出了医疗服务生产和医院运营具有规模经济性及医院规模经济具有特殊性。     

转型期我国公立医院规模经济特征的实证研究

为研究转型期我国公立医院规模经济特征．为有效控制医院规模持续扩张提供依据,应用短期超越对数成本函数模型,以广东省305家公立医院的数据为基础,进行了规模经济实证研究。结论表明：（1）各级公立医院均呈现出规模经济,规模经济呈长“L”型特征,即理论上,我国公立医院可以在无限规模扩张中获得规模经济。（2）各级公立医院均表现为固定资产投入过度转型期我国公立医院规模扩张是以高精尖医疗设备的投入为主要特征。（3）控制城市大医院规模持续扩张的短期措施可以从改变医疗服务项目收费价格着手。长期策略的关键还在于建立一个迫使医院追求成本最小化的制度环境。