| Community Control and Pricing patterns of Nonprofit Hospitals: Findings and Antitrust Implications |
| | Young, Gary J. | Boston U. | health@bu.edu | 617-414-4123 |
| | Desai, Kamal | Boston U. | Kamal.Desai@med.va.gov | (617)-232-9500 |
| | A long-standing debate exists within the antitrust community over whether traditional antitrust standards should be applied to mergers between nonprofit hospitals. Central to the debate is whether nonprofit hospitals are likely to exploit market power in the form of higher prices. According to a leading theoretical perspective, nonprofit hospitals are not likely to exploit market power because the control of these institutions has long been vested in community representatives who would resist such behavior. However, the rise of hospital systems would appear to have attenuated the community control of many nonprofit hospitals since control becomes vested in a system-wide-board and corporate management structure. |
| | Keywords: Hospitals; Mergers; Antitrust |
| Does Reengineering Really Work? An Examination of the Context and Outcomes of Hospital Reengineering Initiatives |
| | Walston, Stephen Lee | Cornell U. | slw20@cornell.edu | (607)-255-2502 |
| | Kimberly, John R. | U. of Pennsylvania / INSEAD | kimberly@wharton.upenn.edu | (215)-898-7937 |
| | Burns, Lawton Robert | U. of Pennsylvania | burnsl@wharton.upenn.edu | (215)-898-3711 |
| | How does reengineering affect the competitive position of hospitals? Although many promises have been made regarding outcomes of process reengineering, little or no research has examined this question. This paper provides an initial exploration of the direct effects of reengineering on the competitive cost position of hospitals and the modifying effects of implementation factors. Results suggest that reengineering without integrative and coordinative efforts may damage an organization's cost position. The use of steering committees, project teams, codification of the change process, and executive involvement in core changes modify reengineering's results to improve an organization's competitive position. In a national sample of hospitals, reengineering alone was not found to improve the relative cost competitive position. Organizations attempting to improve their cost competitiveness must consider the way change is implemented. This research suggests that the process of change may be as important as the change instrument.
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| | Keywords: reengineering; internal restructuring; competitive outcomes |
| Interorganizational Strategies in the Health Industry: Effects on Hospital Financial Performance |
| | Bazzoli, Gloria J. | Northwestern U. | gbazzol1@aha.org | 847-491-2196 |
| | Chan, Benjamin | Health Research and Educational Trust | bchan1@aha.org | (312)-422-2641 |
| | Shortell, Stephen M. | U. of California, Berkeley | shortell@uclink4.berkeley.edu | (510)-643-5346 |
| | The U.S. health industry is undergoing an unprecedented transformation through consolidation of firms into unified organizations and development of inter-firm linkages. These strategies underlie development of "organized delivery systems", as defined by Shortell, in which networks of organizations provide a continuum of services, products, and supporting infrastructure. Our paper examines the effects of these strategies on hospital financial performance.
We assess two dominant strategies being used to align hospitals: 1) health systems in which a parent organization owns the assets of affiliated hospitals; and 2) health networks, which represent strategic alliances among independent hospitals that voluntarily work together. We also examine nine sub-groups of health networks and systems that share core strategies in relation to service differentiation, integration, and centralization. Study data are analyzed for approximately 400 health networks and systems and their 4,000 affiliated hospitals.
We find that hospitals affiliated with health systems generally had better financial performance when compared to hospitals affiliated with health networks. Unified health systems may be better able to implement cost-saving strategies and increase revenues through higher product value or market clout. Substantial diversity in financial performance was present across health network/system sub-groups. Among health networks, service differentiation when coupled with increasing centralization improved financial performance. For health systems, differentiation improved performance when coupled with moderate centralization. Providing some autonomy to individual hospitals within a health system may improve their performance. Overall, our research suggests that health managers must carefully select and align strategies to improve performance.
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| | Keywords: organizational strategy; financial performance; hospital industry |