Organizational and environmental factors associated with local multihospital systems: Precipitants for coordination?

BACKGROUND: Local multihospital systems (LMSs) commonly struggle to effectively coordinate across system members. Although a recent taxonomy of LMSs found the majority of systems to display lower levels of differentiation, integration, and coordination, some categories of LMS forms exhibited higher levels of integration and coordination. PURPOSE: This study examines organizational and environmental factors associated with LMS forms displaying higher levels of integration and coordination. METHODOLOGY/APPROACH: Applying a multitheoretical framework and drawing from sources including the American Hospital Association Annual Survey, Intellimed databases, and primary data collected from LMS communications, descriptive and multinomial logistic regression analyses were conducted to examine the association between LMS forms and varied organizational and environmental characteristics among LMSs in Florida, Maryland, Nevada, Texas, Virginia, and Washington. RESULTS: The results of analysis of variance, Games-Howell, and Fisher's exact tests identified significant relationships between each of the five LMS categories and varying market, competitive, organizational, and operational factors. A multinomial logistic regression analysis also distinguished the three most common LMS forms according to organizational and environmental factors. CONCLUSION: Recognizing the varied degrees of integration and coordination across LMSs today, the results point to several factors that may explain such variation, including market size and resources, local competitors and their forms, organizational size and ownership, patient complexity, and regulatory restrictions. PRACTICE IMPLICATIONS: With the continued promotion and development of innovative health care reform models and with the progressing expansion of care into outpatient sites and diverse settings, LMSs will continue to face greater pressure to integrate and coordinate services throughout the continuum of care across system components and service locations. Navigating the challenges of effective coordination requires administrators and policymakers to be cognizant of the organizational and environmental factors that may hinder or fuel coordination efforts across system components in local markets.

Clustered and distinct: a taxonomy of local multihospital systems.

Despite their prevalence and power in markets throughout the United States, local multihospital systems (LMSs)-also referred to as hospital-based "clusters"-remain an understudied organizational form, with studies instead primarily focusing either upon individual hospitals or viewing hospital systems collectively without distinguishing the local "sub-systems" that comprise larger regional or national hospital chains. To better understand these organizational forms, we develop a taxonomy specifically devoted to LMSs, applying taxonomic analysis methods to a sample of LMSs in six U.S. states while accounting for LMSs' geographic arrangements and non-hospital-based service locations. Our analysis identifies five distinct LMS categories, with forms clearly distinguished according to their varying degrees of differentiation and integration. The study's results accentuate the importance of accounting for hospital systems' activities and arrangements in local markets-including their non-hospital-based sites-and highlight differences in systems' achievement of integration and coordination across services and locations, providing considerations in light of U.S. health system reform as well as international patterns of regional system formation.

Accountable Care Organizations and Transaction Cost Economics.

Using a Transaction Cost Economics (TCE) approach, this paper explores which organizational forms Accountable Care Organizations (ACOs) may take. A critical question about form is the amount of vertical integration that an ACO may have, a topic central to TCE. We posit that contextual factors outside and inside an ACO will produce variable transaction costs (the non-production costs of care) such that the decision to integrate vertically will derive from a comparison of these external versus internal costs, assuming reasonably rational management abilities. External costs include those arising from environmental uncertainty and complexity, small numbers bargaining, asset specificity, frequency of exchanges, and information "impactedness." Internal costs include those arising from human resource activities including hiring and staffing, training, evaluating (i.e., disciplining, appraising, or promoting), and otherwise administering programs. At the extreme, these different costs may produce either total vertical integration or little to no vertical integration with most ACOs falling in between. This essay demonstrates how TCE can be applied to the ACO organization form issue, explains TCE, considers ACO activity from the TCE perspective, and reflects on research directions that may inform TCE and facilitate ACO development.

Executive compensation in health care: a systematic review.

BACKGROUND: Despite continued scrutiny over executive earnings in the health care industry, the evidence for executive pay determinants is uncertain and inconclusive. Theoretical motivations for executive compensation practices have been debated, and questions remain about the explanatory power of previously applied theoretical models. PURPOSES: Our systematic review considered evidence of executive compensation determinants among health care organizations and sought to identify factors affecting executive pay that are commonly supported by previous studies. We also aimed to survey the theoretical perspectives employed in health care executive compensation studies to address how organization theory may explain executive remuneration practices at health care organizations. METHODOLOGY/APPROACH: Twenty-one eligible studies were identified after a search of the MEDLINE/PubMed and CINAHL electronic reference databases and the reference lists of relevant studies. Eligible studies included those examining health care organizations and providing empirical, regression-based outcomes regarding the determinants of executive compensation. Each eligible study was coded to identify pertinent information, including study settings, executive compensation measures, executive compensation determinants and their measures (e.g., financial performance measured as profit margin), outcomes (direction and level of statistical significance of regression model coefficients), and theoretical applications. FINDINGS: Studies are mixed in their findings regarding the statistical significance of various determinants of executive compensation. Many studies indicate that, in addition to firm financial performance, other factors may influence health care executive compensation, including organizational size and human capital attributes. Agency theory was the predominant framework applied, yet the findings suggest a complementary theoretical perspective may better explain health care executive compensation. PRACTICE IMPLICATIONS: To address critics who assert health care executive compensation levels are not consistent with organizational performance, health care organization CEOs, board members, and consultants would benefit to carefully consider and effectively communicate the numerous factors influencing executive compensation beyond firm financial performance.

Post-acute care and vertical integration after the Patient Protection and Affordable Care Act.

The anticipated changes resulting from the passage of the Patient Protection and Affordable Care Act-including the proposed adoption of bundled payment systems and the promotion of accountable care organizations-have generated considerable controversy as U.S. healthcare industry observers debate whether such changes will motivate vertical integration activity. Using examples of accountable care organizations and bundled payment systems in the American post-acute healthcare sector, this article applies economic and sociological perspectives from organization theory to predict that as acute care organizations vary in the degree to which they experience environmental uncertainty, asset specificity, and network embeddedness, their motivation to integrate post-acute care services will also vary, resulting in a spectrum of integrative behavior.

Freestanding inpatient rehabilitation facility performance following the 60 percent rule: a matter of fit.

The 60 percent rule has served as a controversial policy change within the postacute care sector since its revision in 2004, requiring inpatient rehabilitation facilities (IRFs) to admit no less than 60% of patients according to 1 of 13 specific conditions or else risk the loss of IRF designation according to Medicare's prospective payment system. Using a contingency theory framework, this study proposes that the 60 percent rule introduced considerable uncertainty into freestanding IRFs' operational environment, and as a result, IRFs' operational performance varied according to their "fit" between certain structural characteristics and the pervasive environmental uncertainty. The results suggest that operational performance, as measured by facility Malmquist Index scores, decreased on average for freestanding IRFs following the 60 percent rule's enforcement in 2005. In contrast, organizations possessing structural characteristics that better "fit" the heightened environmental uncertainty exhibited improved performance on average during the study's 6-year time period.