Service duplication within urban hospital clusters.

BACKGROUND: Approximately 80% of multihospital system member hospitals in U.S. urban areas are clustered with other same-system member hospitals located in the same market area. A key argument for clustering is the potential for reducing service duplication across cluster members. PURPOSE: The aim of this study is to examine the effects of characteristics of hospital clusters on service duplication within 339 hospital clusters in U.S. metropolitan statistical areas and adjacent counties in 2002. METHODOLOGY/APPROACH: Ordinary least squares regression is used to estimate the relationship between cluster characteristics in 1998 and duplicated services per cluster member in 2002. FINDINGS: Duplication is higher in hospitals clusters with higher case mix index and higher bed size range. Duplication is lower in hospital clusters with more members, for-profit ownership, and more geographic dispersion. PRACTICE IMPLICATIONS: Increases in the size of hospital clusters allow more opportunities for service rationalization. For-profit clusters may be innovators in rationalization activity, and they should be studied in this regard. Clusters with a higher case mix, lower geographic dispersion, and hub-and-spoke design (with high bed-size range) may find service reallocation less feasible.

Urban hospital 'clusters' do shift high-risk procedures to key facilities, but more could be done.

Since the 1990s, rapid consolidation in the hospital sector has resulted in the vast majority of hospitals joining systems that already had a considerable presence within their markets. We refer to these important local and regional systems as "clusters." To determine whether hospital clusters have taken measurable steps aimed at improving the quality of care-specifically, by concentrating low-volume, high-complexity services within selected "lead" facilities-this study examined within-cluster concentrations of high-risk cases for seven surgical procedures. We found that lead hospitals on average performed fairly high percentages of the procedures per cluster, ranging from 59 percent for esophagectomy to 87 percent for aortic valve replacement. The numbers indicate that hospitals might need to work with rival facilities outside their cluster to concentrate cases for the lowest-volume procedures, such as esophagectomies, whereas coordination among cluster members might be sufficient for higher-volume procedures. The results imply that policy makers should focus on clusters' potential for restructuring care and further coordinating services across hospitals in local areas.

Health care delivery restructuring and productivity change: assessing the Veterans Integrated Service Networks (VISNs) using the Malmquist approach.

This study evaluates the productivity changes for the Veterans Integrated Service Networks (VISNs) that the Veterans Health Administration (VHA) created, comparing performance in 1994 with that in 2004. This represents periods before and after the VHA in 1995 reconfigured provider units into 21 regionalized delivery systems and engaged in other important system innovations. Productivity is measured using the Malmquist Index approach (a longitudinal version of the data envelopment analysis [DEA]). Results indicate that the VISN restructuring generally produced improvements in overall productivity (Malmquist scores) and in VISN adaptations to structural/technological change. They also show that the VISNs overall did not produce "changes in efficiency," reflecting challenges they may have faced in making "technical change" through management adaptations. The findings are consistent with what would be expected, given the major changes that did occur within the VHA in recent years as well as the before and after design used in this study.

Better to receive than to give? Interorganizational service arrangements and hospital performance.

BACKGROUND: The literature points to possible efficiencies in local-hospital-system performance, but little is known about the internal dynamics that might contribute to this. Study of the service arrangements that nearby same-system hospitals have with one another should provide clues into how system efficiencies might be attained. PURPOSES: The purpose of this research was to better understand the financial and operational effects of service sharing and receiving arrangements among nearby hospitals belonging to the same systems. METHODOLOGY/APPROACH: Data are compiled for the 1,227 U.S. urban acute care hospitals that belong to multihospital systems. A longitudinal structural equation model is employed-environmental pressures and organizational characteristics in 1997 are associated with service sharing and receiving arrangements in 2000; service sharing and receiving arrangements are then associated with performance in 2003. Service sharing and receiving are measured by counts of services focal hospitals report that are not duplicated by other-system hospitals within the same county. Linear Structural Relations (LISREL) is used to estimate the model. FINDINGS: In general, market competition from managed care and hospitals influences hospitals to exchange services. For individual hospitals, service sharing has no effects on operational efficiency and financial performance. Service receiving, however, is related to greater efficiencies and higher profits. PRACTICE IMPLICATIONS: The findings underscore the asymmetrical relationships that exist among local-system hospitals. Individual hospitals benefit from service receiving arrangements but not from sharing arrangements-it is better to receive than to give. To the extent that individual hospitals independently determine service capacities, systems may not be able to effectively rationalize service offerings.

The efficiency of hospital-based clusters: evaluating system performance using data envelopment analysis.

BACKGROUND: The rapid increase in the number of hospitals becoming members of multihospital systems in recent decades has led to the formation of local and regional clusters that have the potential to function as regional systems, a model long advocated as a policy strategy for improving health system performance. PURPOSE: This study addresses both cluster efficiency and the hierarchical configuration with which hospitals are grouped into clusters. METHODOLOGY/APPROACH: This study uses 2004 data from the American Hospital Association Annual Survey multihospital system designations updated to 2005. Efficiencies are measured using data envelopment analysis. PRINCIPAL FINDINGS: The data envelopment analysis results show that 20 clusters or 5.8% of the sample of 343 clusters are highly efficient; the remaining 323 or 94.2% of the clusters received lesser efficiency scores, averaging 0.73 on the data envelopment analysis measure. The study found the number of beds in the primary hospitals and the percentage of hospitals in the clusters that were urban, two of three variables that reflect patterns of regional model service configurations, to be significantly correlated with cluster efficiency. CONCLUSION: Results suggest that many hospital clusters have evolved service configurations that are consistent with historically conceptualized regional organizational forms and that the particular regional pattern of distributing service capacities across cluster members might contribute to measured performance. The study also confirms the applicability of data envelopment analysis for assessing the performance of complex, multiunit organizations.

Hospital service duplication: evidence on the medical arms race.

BACKGROUND: Hospital administrators face challenging decisions about whether to maintain, cut, or add services in response to changes in consumer demand or managed-care pressures. The challenge is heightened for services that are also offered by other hospitals in the local community. PURPOSES: This study provides evidence on the financial effects of providing services that are also provided by other hospitals in the same county. Its purpose is to help guide administrators and policy makers in assessing the wisdom of service duplication at the local level. METHODOLOGY/APPROACH: The unit of analysis is the individual hospital. The study reports data from the 2,204 general acute care hospitals located in counties with more than one hospital. A longitudinal path model is constructed for the years 1998, 2000, and 2002, with environmental and organizational factors from 1998 affecting service duplication in 2000, which in turn affects financial performance in 2002. Maximum likelihood estimation in linear structural relations is used to evaluate the path model and its coefficients. FINDINGS: Hospital competition is associated with higher levels of duplication of inpatient, ancillary, and high-tech services. Duplication of inpatient services is associated with higher costs but also with higher operating margin. Duplication of ancillary services is associated with higher return on assets. Duplicated high-tech services are financial losers for hospitals. Higher levels of duplicated high-tech services are associated with higher cost per day, higher cost per discharge, and lower operating margin. PRACTICE IMPLICATIONS: From the standpoint of financial impact on the hospital, administrators should reexamine the costs and benefits of offering high-tech services that are offered by other providers in the local area. The higher costs may not be offset by revenues. Duplicated ancillary and inpatient services, on the other hand, produce some positive financial returns.

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.

A post-1990s assessment of strategic hospital alliances and their marketplace orientations: time to refocus.

In past years, many SHAs formed in local urban markets to better compete for managed care contracts. In response to 1990s forces, these SHAs appear to have adapted product, production, and selling orientations to their markets, aimed at large institutional purchasers of health care. However, health care markets have evolved differently than anticipated. SHAs and their hospitals should now adopt the marketing orientation and focus more on patients and enrollees.