The effect of hospital control strategies on physician satisfaction and physician-hospital conflict.

This article examines several strategies that hospitals use to control their medical staffs. Such strategies include placing physicians on salary, developing exclusive hospital affiliations with physicians, and involving physicians in decision-making bodies. Using regression techniques, we investigate which hospitals are more likely to utilize these strategies and whether such strategies are effective in promoting physician-hospital integration. Contrary to our expectations, corporate hospital structures (e.g., for-profit hospitals, membership in multihospital systems) generally do not employ these strategies more often and oftentimes employ them less. There is also little evidence that control strategies are effective levers for increasing physician satisfaction or decreasing physician-hospital conflict. We suggest that control strategies are useful for purposes other than promoting physician-hospital integration. Finally, hospital ownership appears to exert the biggest effect on physician satisfaction and conflict.     

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.     

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.     

The effect of selective contracting on hospital costs and revenues

OBJECTIVE: To examine the effects of selective contracting on California hospital costs and revenues over the 1983-1997 period. DATA SOURCES/STUDY SETTING: Annual disclosure data and discharge data sets for 421 California general acute care hospitals from 1980 to 1997. ANALYSIS: Using measures of competition developed from patient-level discharge data, and financial and utilization measures from the disclosure data, we estimated a fixed effect multivariate regression model of hospital costs and revenues. FINDINGS: We found that hospitals in more competitive areas had a substantially lower rate of increase in both costs and revenues over this extended period of time. For-profit hospitals lowered their costs and revenues after selective contracting was initiated relative to the cost and revenue levels of not-for-profit hospitals. The Medicare PPS has also led high-cost hospitals to lower their costs. CONCLUSIONS: The more competitive the hospital's market, the greater degree to which it has had to lower the rate of increase in costs. A similar pattern exists with regard to hospital revenues. Both of these trends appear to result from the growth of selective contracting. It remains unclear to what extent these cost reductions were the result of increased efficiency or of reduced quality. Since hospital cost growth is sensitive to the competitiveness of its market, antitrust enforcement is a critical element in any cost containment policy.     

Hospital Pricing Following Integration with Physician Practices

The past decade has witnessed a new wave of hospital-physician integration, with the fraction of hospitals owning any office-based physician practice increasing from 28% in 2009 to 53% in 2015 nationwide. We offer one of the first hospital-level longitudinal analyses in examining how hospital-physician integration affects hospital prices in the modern healthcare environment. We find a robust 3–5% increase in hospital prices following integration. There is little indication that hospital quality is commensurately higher or that patient mix has changed following integration. Our supplementary analyses point to stronger bargaining leverage and foreclosure of rival hospitals as potential mechanisms for the estimated price effects.     

Hospital board effectiveness: relationships between governing board composition and hospital financial viability.

OBJECTIVE. Two theories--agency and managerialism--are compared with respect to their usefulness in explaining the role of insiders on the hospital board: whether their participation enhances or impairs board financial decision making. DATA SOURCES/STUDY SETTING. The study used 1985 hospital financial and governing board data for a representative sample of acute care California hospitals. STUDY DESIGN. Relationships were examined cross-sectionally between the presence or absence of insiders on the board and measures of hospital financial viability while controlling for the organizational factors of system affiliation, ownership, size, region, and corporate restructuring. PRINCIPAL FINDINGS. Multiple regression analysis found significant relationships between insider (CEO, medical staff) participation and hospital viability. CONCLUSIONS. These results support the managerial theory of governance by suggesting that the CEO and medical staff provide informational advantages to the hospital governing board. However, the cross-sectional design points to the need for future longitudinal studies in order to sequence these relationships between insider participation and improved hospital viability.     

The effect of chain membership on hospital costs.

OBJECTIVE: To compare the cost structures of hospitals in multihospital systems and independently owned hospitals. DATA SOURCES: The American Hospital Association's Annual Survey from 1990 for data on hospital costs and attributes. Area characteristics came from the Area Resource File, and the Medicare case-mix index came from the Health Care Financing Administration. Data on wages are from the Bureau of the Census' State and Metropolitan Area Data Book. The Guide to Hospital Performance from HCIA, Inc. provided data on quality of care. STUDY DESIGN: Separate cost functions were estimated for chain and independent hospitals. Hybrid translog cost functions included measures of outputs, input prices, and hospital and area characteristics. The estimation method accounted for the simultaneous determination of costs and chain membership, and for any nonrandom selection of hospitals into chains. Several economic cost measures were calculated to compare the cost structures of the two types of hospitals. DATA EXTRACTION METHODS: Data from all sources were merged at the hospital level to form the study sample. PRINCIPAL FINDINGS: Hospitals in multihospital systems were less costly than independently owned hospitals. Among independent hospitals, for-profits had the highest costs. There were no statistically significant differences in costs by ownership among chain members. Economies of scale were enjoyed in both types of hospitals only at high volumes of output, while economies of scope occurred at all volumes for chain hospitals, but only at low and medium volumes for independent hospitals. CONCLUSIONS: This study provides support for the idea that growth of the multihospital system sector can provide a market solution to the problem of constraining costs. It does not, however, support the property rights theory that proprietary hospitals are more efficient than nonprofit hospitals.     

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.     

Physician involvement in management and governance: the moderating effects of staff structure and composition

Many hospitals are actively pursuing strategies that integrate physicians into their management and governance structures. Despite expectations that these strategies improve hospital efficiency, empirical studies have failed to provide consistent evidence that physician involvement in hospital management and governance improves hospital efficiency. This article examines factors that may moderate the relationship between physician participation in hospital management and governance and hospital efficiency.     

The cost of health insurance administration in California: estimates for insurers, physicians, and hospitals

Administrative costs account for 25 percent of health care spending, but little is known about the portion attributable to billing and insurance-related (BIR) functions. We estimated BIR for hospital and physician care in California. Data for physician practices came from a mail survey and interviews; for hospitals, from regulatory reporting; and for private insurers, from a consulting company. Private insurers spend 9.9 percent of revenue on administration and 8 percent on BIR. Physician offices spend 27 percent and 14 percent, and hospitals, 21 percent and 7-11 percent, respectively. Overall, BIR represents 20-22 percent of privately insured spending in California acute care settings.     

Hospital-MD joint ventures move forward despite hurdles

Although experts say joint ventures are not a financial cure-all for hospitals, hospital-physician partnerships continue to move forward on hospital agendas. Despite some of the regulatory and practical challenges facing would-be joint venturers, health care attorneys, hospital executives and consultants agree that well-planned joint ventures can reap significant rewards for all parties involved. From purchasing equipment together to arranging for joint ownership of an entire hospital, hospital administrators and physician groups are broadening the range of a business management tool with a successful track record. Says one hospital CEO involved in a joint venture with a competing institution, "What drives these things is what's in the best interest of the patients." Joint ventures, he concludes, are "going to be more and more a part of our future."     

Promoting clinical involvement in hospital quality improvement efforts: the effects of top management, board, and physician leadership.

STUDY QUESTION: An examination of the effects of top management, board, and physician leadership for quality on the extent of clinical involvement in hospital CQI/TQM efforts. DATA SOURCES: A sample of 2,193 acute care community hospitals, created by merging data from a 1989 national survey on hospital governance and a 1993 national survey on hospital quality improvement efforts. STUDY DESIGN: Hypotheses were tested using Heckman's two-stage modeling approach. Four dimensions of clinical involvement in CQI/TQM were examined: physician participation in formal QI training, physician participation in QI teams, clinical departments with formally organized QA/QI project teams, and clinical conditions and procedures for which quality of care data are used by formally organized QA/QI project teams. Leadership measures included CEO involvement in CQI/TQM, board quality monitoring, board activity in quality improvement, active-staff physician involvement in governance, and physician-at-large involvement in governance. Relevant control variables were included in the analysis. PRINCIPAL FINDINGS: Measures of top management leadership for quality and board leadership for quality showed significant, positive relationships with measures of clinical involvement in CQI/TQM. Active-staff physician involvement in governance showed positive, significant relationships with clinical involvement measures, while physician-at-large involvement in governance showed significant, negative relationships. CONCLUSIONS: Study results suggest that leadership from the top promotes clinical involvement in CQI/TQM. Further, results indicate that leadership for quality in healthcare settings may issue from several sources, including managers, boards, and physician leaders.     

Corporate and philanthropic models of hospital governance: a taxonomic evaluation.

OBJECTIVE. We assess the theoretical integrity and practical utility of the corporate-philanthropic governance typology frequently invoked in debates about the appropriate form of governance for nonprofit hospitals operating in increasingly competitive health care environments. DATA SOURCES. Data were obtained from a 1985 national mailed survey of nonprofit hospitals conducted by the American Hospital Association (AHA) and the Hospital Research and Educational Trust (HRET). STUDY DESIGN. A sample 1,577 nonprofit community hospitals were selected for study. Representativeness was assessed by comparing the sample with the population of non-profit community hospitals on the dimensions of bed size, ownership type, urban-rural location, multihospital system membership, and census region. DATA COLLECTION. Measurement of governance types was based on hospital governance attributes conforming to those cited in the literature as distinguishing corporate from philanthropic models and classified into six central dimensions of governance: (1) size, (2) committee structure and activity, (3) board member selection, (4) board composition, (5) CEO power and influence, and (6) bylaws and activities. PRINCIPAL FINDINGS. Cluster analysis and ANCOVA indicated that hospital board forms adhered only partially to corporate and philanthropic governance models. Further, board forms varied systematically by specific organizational and environmental conditions. Boards exhibiting more corporate governance forms were more likely to be large, privately owned, urban, and operating in competitive markets than were hospitals showing more philanthropic governance forms. CONCLUSIONS. Findings suggest that the corporate-philanthropic governance distinction must be seen as an ideal rather than an actual depiction of hospital governance forms. Implications for health care governance are discussed.     

Recruitment of Physicians To Rural America: A View Through the Lens of Transaction Cost Theory

CONTEXT: Many rural hospitals in the United States continue to have difficulties recruiting physicians. While several studies have examined some of the factors affecting the nature of this problem, we know far less about the role of economic incentives between rural providers and physicians. PURPOSE: This conceptual article describes an economic theory of organization called Transaction Cost Theory (TCT) and applies it to rural hospital-physician relationships to highlight how transaction costs affect the type of contractual arrangement used by rural hospitals when recruiting physicians. METHODS: The literature is reviewed to introduce TCT, describe current trends in hospital contracting with physicians, and develop a TCT contracting model for analysis of rural hospital-physician recruitment. FINDINGS: The TCT model predicts that hospitals tend to favor contractual arrangements in which physicians are full-time employees if investments in physical or other assets made by hospitals cannot be easily redeployed for other services in the health care system. Transaction costs related to motivation and coordination of physician services are the key factors in understanding the unique contractual difficulties faced by rural providers. CONCLUSIONS: The TCT model can be used by rural hospital administrators to assess economic incentives for physician recruitment.     

Mobile technology in rural hospitals: the case of the CT scanner.

OBJECTIVE. This study evaluates the relationship between hospital and regional characteristics and the prevalence of mobile computed tomography in rural hospitals. DATA SOURCES AND STUDY SETTING. Primary data were gathered from all rural hospitals in eight northwestern states (n = 471) in 1991. Secondary data sources include the AHA Annual Survey, the Area Resource File, and HCFA's PPS data sets for 1987-1990. STUDY DESIGN. Primary data are a single observation taken in the summer of 1991. Key hospital characteristics include patient volume, distance to the nearest referral center, distance to the nearest hospital, financial performance, and medical staff size. Key regional variables include beds per unit area, hospitals per unit area, and physician supply. DATA COLLECTION. A structured telephone interview was conducted with the hospital administrator at each hospital. For many hospitals, detailed information was gathered with additional calls to hospital personnel. PRINCIPAL FINDINGS. Where hospitals are closely spaced, mobile CT suppliers are more readily available, and hospitals are more likely to choose mobile CT than in areas where hospitals are farther apart. Hospitals may realize economies of scale and scope in their decisions about CT adoption. CONCLUSIONS. Transportation costs are an important determinant of hospital decisions about acquiring CT, but may be less important for higher-priced medical technologies. There is no support for the proposition that rural hospitals compete with referral centers for patients by purchasing technological equipment.     

Institutional responses to Medicare's prospective payment system

The introduction of Medicare's prospective payment system (PPS) meant an important change in the environment of US hospitals. The new payment system was expected to improve clinical and non-clinical efficiency in hospitals. A case study in a non-profit Pennsylvania hospital was performed to analyse the impact of PPS on hospital services. The hospital responded to PPS by a twofold strategy. First, attempts were made to achieve effective cost containment by improving the efficiency of intermediate and final outputs. Here special attention is paid to the activities of the DRG coordinator and the Utilization Review Committee and to the activities of nurses in their role as case manager. The second strategy was directed at revenue enhancement, initially mainly by shifting more costs to non-Medicare patients and later by trying to strengthen the position of the hospital in the local health care market. This second strategy was considered more important than the strategy of cost containment. With respect to organizational structure and policy-making, the following changes can be observed: a growing importance of strategic management; more integrated hospital-physician relationships; and the development of an adequate medical information system and a medical records department.     

江苏省公立医院管办分开的探索和启示

随着医药卫生体制改革的进一步深化,探索管办分开的实现形式已成为当前公立医院改革的难点之一。文章在指出当前我国公立医院管理体制存在问题的基础上,分析评价张家港乡镇医院的"镇办镇管"模式、无锡市属医院的"医管中心"模式和镇江的"医疗集团"模式,总结江苏省公立医院管办分开的成功经验,希冀为更好推进公立医院的改革提供借鉴。     

Assessing the extent of integration achieved through physician-hospital arrangements

In this article we examine management service organizations (MSOs), physician-hospital organizations (PHOs), hospital-affiliated independent practice associations (IPAs), and hospital-sponsored "group practices without walls" (GPWWs) that allow physicians to retain their practices and link hospitals and health systems to physicians through contractual arrangements. Also examined were medical foundations (MFs), integrated salary models (ISMs), and integrated health organizations (IHOs) that own the physical assets of physician practices and contract with payors for physician and hospital services. The research provides several new insights for understanding the structure and process of physician-hospital integration. It was found that the extent of processual integration in physician-hospital organizational arrangements can be measured along six dimensions: administrative and practice management services; physician financial risk-sharing; joint ventures to create new services; computer linkages; physician involvement in strategic planning; and salaried physician arrangements. These dimensions are consistent with the conceptual and empirical dimensions developed by others. These findings refute the notion raised by some industry observers that the new physician-hospital organizational models simply formalize integrative activities already in place. Earlier studies from the 1980s reported that hospitals integrated physicians through involvement in governance, capital planning, and the provision of practice management services. In contrast, we found that current integration.     

Compensation, social trends alter hospital-MD relations

Changes in physician compensation and social trends are ushering in a new era in hospital-physician group relations, according to experts. Physician payment reform, the shift toward managed care, ongoing primary care physician shortages, and the changing lifestyle preferences of younger physicians are helping to redefine hospital-MD relations for years to come. Still, some health care organizations are ahead of the curve on this issue. Meanwhile, what does it take to lure a city doctor to Weiser, Idaho? Some towns will do almost anything to recruit a physician.     

Taxonomy of Health Networks and Systems: A Reassessment

Objective. To assess a widely recognized multihospital system taxonomy.
Data Sources. The original taxonomy was based on American Hospital Association (AHA) Annual Survey Data for the years 1994 and 1995 and a reexamined version, on 1998 AHA data.
Study Design. We assess the appropriateness of using data designed to capture local hospital/system interrelationships to develop a taxonomy of multihospital systems.
Data Abstraction Methods. The original and reexamined taxonomies used dichotomous measures of service availability, physician practice ownership, and managed care offerings.
Principal Findings. The data and measures used to formulate the taxonomy are not appropriate for classifying multihospital systems at the company level.
Conclusions. Taxonomic studies of multihospital systems are very much needed; future taxonomic studies should make clear distinctions between systems at local versus company levels.