A resource-dependence model of hospital contract management.

This study empirically examines the determinants of hospital entry into management contracts with multihospital systems. Using a resource-dependence framework, the study tests whether market conditions, regulatory climate, management effectiveness, and certain enabling factors affect the probability of hospital entry into a contract management arrangement. The study used a pooled sample of 312 contract-managed and 936 traditionally managed hospitals. Results suggest the importance of management effectiveness, regulatory climate, and hospital ownership (investor owned or nonprofit) as predisposing conditions of contract management.     

Contract management in USA hospitals: service duplication and access within local markets

This paper examines the extent to which hospitals that are under external contract management engage in service duplication, as well as the degree to which the various services they offer contribute to or detract from community access. The study incorporates all USA hospitals using data from the American Hospital Association Annual Survey Database, supplemented by county level measures obtained from the area resource file (ARF). Using data on the 3794 hospitals classified as acute care facilities in 2002, we performed a set of logistic regressions that analyzed whether a hospital offered each of 74 distinct services. For each service (regression), key independent variables measured the number of other hospitals in the local market area that also offered the service. Local area market definitions are the areas circumscribed by the hospital within distances of 10 and 20 miles. Results suggest that contract-managed (CM) hospitals display a more competitive pattern (service duplication) than hospitals in general, but CM hospitals that are the sole provider of services locally are less likely to offer services than traditionally managed sole hospital providers. Contract management does not appear to offer any particular advantages in improving access to hospital services.     

Effects of contract management on hospital performance.

The performance of contract-managed (CM) hospitals is compared to that of a set of internally managed hospitals matched on a variety of hospital and market area characteristics. The performance of the study hospitals was similar to that of the matches in the years before the onset of contract management. Among 12 performance indicators, only occupancy rates differed significantly in the two samples in the years before contract management. Occupancy rates were lower on average in the hospitals which later became contract managed. During the 3 years following the onset of contract management, the CM hospitals showed no improvement in productive efficiency but did show changes in the way services were priced. The ratio of gross patient revenue to total expense increased significantly in the CM hospitals relative to their matches. This increase also appears to be associated with an increase in net profits in the CM hospitals relative to their matches.     

Contract management and institutional cost control

The ability of contract management to control hospital cost is explored. Trends in cost-related performance factors for 61 contract-managed hospitals, three years pre- and three years postcontract, omitting the contract year, are examined. The study also considers factors derived from contract features and hospital characteristics that have been missing from past studies and more than doubles the data base of previously reported studies. To focus on current policy needs, cost-containment issues are emphasized. Analysis of these data suggests that contract management contained costs in the small isolated hospitals that have historically purchased these services during a period when cost containment was not rewarded by reimbursement policy.     

Trends in contract management: the hidden evolution in hospital organization

Contract management is an arrangement whereby the day-to-day operation of the hospital is contracted to an outside organization. In the past two decades there has been dramatic growth in the number of hospitals opting for contract management, yet surprisingly little attention has been paid to this phenomenon. Using national data, we report trends and demonstrate that adoption of contracts results in decreases in service offerings more often than increases. Since contract-managed hospitals tend to be located in rural areas, this raises concerns regarding access to care. On the other hand, contract management may allow distressed hospitals to survive.     

An analysis of managed care provided by charitable hospitals in Brazil

This article describes charitable hospitals in Brazil that provide managed care and the health management organizations themselves, considering the level of autonomy by the latter in relation to the hospitals and their degree of management development, based on a nationwide study. A random sample of individual hospitals was drawn from the hospital groups. After refusals and replacements, the final sample consisted of 112 individual hospitals and 10 hospital groups. The charitable hospitals' managed care plans do no operate precisely according to the overall Brazilian health plan market, in which most of the managed care is situated in insurance companies, group medicine, and medical cooperatives. Rather than operating as typical plans, they function "inside the organization or hospital itself", almost always with a limited management infrastructure and with little autonomy in relation to the organizations harboring them. Individual plans were more common than collective products, unlike the rest of the market, which may also result from the limited management capacity of these arrangements.     

The private management of public hospitals.

Since the public sector traditionally has provided the public goods viewed as unprofitable by the private sector, the growing trend to manage public hospitals under outside private contract raises some fundamental issues of concern. It is hypothesized here that the system maintenance and output goals of privately managed public hospitals become increasingly similar to those of investor-owned hospitals. The thesis is empirically tested using documented effects of private contract management on the operative goals of short-term, general hospitals owned by local governmental bodies. Traditionally managed public hospitals matched with the study hospitals on important characteristics serve as the control group. Costs do appear to be reduced under private contract management, but the service structure becomes somewhat altered. It is the task of public health policymakers to reconcile the cost-control and efficiency mechanisms brought about by private management with the community's right of access to comprehensive medical care. Carefully structured regionalization plans--a possible means of providing both--will require the stimulation of more government involvement during an era of cutbacks.     

Hospital management contracts: institutional and community perspectives.

Previous studies have shown that external management by contract can improve the performance of managed hospitals. This article presents a conceptual framework which develops specific hypotheses concerning improved hospital operating efficiency, increased ability to meet hospital objectives, and increased ability to meet community objectives. Next, changes in the process and structure of management under contractual arrangements, based on observations from two not-for-profit hospital systems, are described. Finally, the effects of these management changes over time on hospital and community objectives are presented. These effects suggest progressive stages in the development of management contracts. The first stage focuses on stabilizing hospital financial performance. Stage two involves recruitment and retention efforts to secure necessary personnel. In the third stage, attention shifts to strategic planning and marketing.     

Are you violating antitrust laws?

A hospital enters into an exclusive contract for staffing of its emergency room. Physicians band together into a managed care organization. Another hospital enters into an exclusive contract for anesthesiology services. Yet another agrees to refer patients exclusively to a vendor of durable medical equipment. These and similar arrangements, increasingly common in the health care industry, have one thing in common: They have been challenged repeatedly as antitrust violations. The providers have won some of these lawsuits and lost others. Short of avoiding all exclusive contracts, how can you avoid such a lawsuit, or at least improve your chance of winning it? This article outlines the antitrust principles that apply to exclusive contracts and joint ventures between health care providers. Its purpose is to alert you to situations that may implicate the antitrust laws. Because antitrust law is complex and turns on the specific facts of each situation, you should consult with your legal counsel whenever antitrust questions arise.     

A transaction costs analysis of changing contractual relations in the English NHS

The English National Health Service has replaced locally negotiated block contracting arrangements with a system of national prices to pay for hospital activity. This paper applies a transaction costs approach to quantify and analyse the nature of how contracting costs have changed as a consequence. Data collection was based on semi-structured interviews with key stakeholders from hospitals and Primary Care Trusts, which purchase hospital services. Replacing block contracting with activity based funding has led to lower costs of price negotiation, but these are outweighed by higher costs associated with volume control, of data collection, contract monitoring, and contract enforcement. There was consensus that the new contractual arrangements were preferable, but the benefits will have to be demonstrated formally in future.     

Supply usage data base helps set best practices

As hospitals move more quickly toward managed care, the impact of industry changes is taking its toll. Networks and systems are rapidly being formed throughout the industry. One advantage of network formation is group purchasing and system-wide contract development. Bundling large volume contracts can produce lower prices for the individual hospitals. Now the challenge for individual hospitals is "where do we go from here?" In many cases, the "system" performs the contract function and the price of most product lines has already been reduced. This article looks at how Alta Bates Hospital in Berkley, CA, continues its efforts to reduce costs as an individual hospital within a larger system, using supply data base information.     

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.     

The impact of New Public Management on efficiency: An analysis of Madrid's hospitals

Madrid has recently become the site of one of the most controversial cases of public healthcare reform in the European Union. Despite the fact that the introduction of New Public Management (NPM) into Madrid hospitals has been vigorous, little scholarship has been done to test whether NPM actually led to technical efficiency. This paper is one of the first attempts to do so. We deploy a bootstrapped data envelopment analysis to compare efficiency scores in traditionally managed hospitals and those operating with new management formulas. We do not find evidence that NPM hospitals are more efficient than traditionally managed ones. Moreover, our results suggest that what actually matters may be the management itself, rather than the management model.     

Contract management

From the employee cafeteria to the emergency department all the way to the executive offices, there are contract firms that will provide hospitals with a spectrum of services. But how do health care executives decide whether this is the right option for their hospital?     

Hospital adaptation to risk-bearing: managerial implications of changes in purchaser-provider contracting

A number of countries have adopted contracting reforms in which hospitals are placed at financial risk. This risk has stimulated a number of adaptive strategies to achieve organizational success. This paper presents a model of six forms of contracting relationships and reviews the adaptation strategies observed in three health systems: the USA, England and the Netherlands. These strategies include service diversification, improved management information systems, the employment of marketing and contract managers, the use of clinical pathways, case management and concurrent/retrospective review of hospital stays, quality management and quality assurance programs, pre-admission authorization, discharge planning, and physician profiling and participation in management. These adaptive strategies have three implications for managers: increased 'partnering', with purchasers, collaboration with medical staff, and assumption of managed care roles. Two groups of institutions are at risk from the changes in hospital contracting: university teaching hospitals and inner-city hospitals serving socially deprived populations. The paper ends with implications for the education of hospital managers and research on hospital management and adaptation to contracting.     

Materiel management: time for a new beginning

Industry forecasters have predicted that most hospitals will belong to a multi-hospital system or an alliance by the end of this decade or they will simply disappear. This will concomitantly expand and contract the role of materiel managers, while creating new challenges for them in free-standing hospitals or in a multi-hospital system environment. What should materiel management's role be in this new arena? What functions or activities should materiel management be responsible for functionally or administratively? How should a hospital or multi-hospital system's materiel management department be organized to meet this new challenge? What relationship should evolve between hospital divisions and the system's materiel management department? Who should control the purchasing, inventories, and distribution for hospital divisions? What functions should be centralized and what should be decentralized? The answers to these questions will be discussed in this article.     

The rise and fall(acy) of clinical directorates in Italy

Clinical Directorates (CDs), in the sense of "intermediate organizational arrangements through which defined parts of larger hospitals health services are managed", were introduced in the Italian National Health Service (INHS) by law after the major reform of 1992. By means of such reform, accountability chains within INHS hospitals were streamlined. Changes looked at strengthening the role of management in hospitals as a strategy to improve efficiency in the provision of services. From this stream of managerialism emerged the attempts to re-organize hospital activities along the lines of clinical directorates. The aim of this paper is to outline the context in which CDs initially developed in Italy as the "one best way" to address current hospital problems and the reasons why they are now challenged due to not coming up to expectations. To do so we run through the last 10 years of history of CDs in Italy and propose an interpretative framework to understand the grounds for their partial failure and success.     

Private medical services in the Italian public hospitals: the case for improving HRM

This study explores how Italian public hospitals can use private medical activities run by their employed physicians as a human resources management (HRM) tool. It is based on field research in two acute-care hospitals and a review of Italian literature and laws. The Italian National Health Service (NHS) allows employed physicians to run private, patient-funded activities ("private beds", surgical operations, hospital outpatient clinics, etc.). Basic regulation is set at the national level, but it can be greatly improved at the hospital level. Private activities, if poorly managed, can damage efficiency, equity, quality of care, and public trust in the NHS. On the other hand, hospitals can also use them as leverage to improve HRM, with special attention to three issues: (1) professional evaluation, development, and training; (2) compensation policies; (3) competition for, and retention of, professionals in short supply. The two case studies presented here show great differences between the two hospitals in terms of regulation and organizational solutions that have been adopted to deal with such activities. However, in both hospitals, private activities do not seem to benefit HRM. Private activities are not systematically considered in compensation policies. Moreover, private revenues are strongly concentrated in a few physicians. Hospitals use very little of the information provided by the private activities to improve knowledge management, career development, or training planning. Finally, hospitals do not use private activities management as a tool for competing in the labor market for health professionals who are in short supply.     

Efficacy of system management or ownership as options for distressed small rural hospitals.

Systems linkages through signing a management contract or selling to a multihospital system have been advocated as strategies for addressing the distress of small rural hospitals through increased management capacity. This national study compares 311 independent self-managed hospitals, 194 independent systems-managed and 235 systems-owned and managed hospitals in relation to occupancy levels and secondary measures of performance. Almost no differences were found in performance among the three groups. Distress was found to be highly associated with hospitals under 50 beds and less supportive environments. The data presented suggests that many of the advantages of systems linkage may be obtained in other ways and that a management contract or sale to a multi-hospital system may not solve the problems of a rural hospital.