TY - JOUR
T1 - Is the System Really the Solution? Operating Costs in Hospital Systems
AU - Burns, Lawton Robert
AU - McCullough, Jeffrey S.
AU - Wholey, Douglas R.
AU - Kruse, Gregory
AU - Kralovec, Peter
AU - Muller, Ralph
N1 - Publisher Copyright:
© The Author(s) 2015.
PY - 2015/6/10
Y1 - 2015/6/10
N2 - Hospital system formation has recently accelerated. Executives emphasize scale economies that lower operating costs, a claim unsupported in academic research. Do systems achieve lower costs than freestanding facilities, and, if so, which system types? We test hypotheses about the relationship of cost with membership in systems, larger systems, and centralized and local hub-and-spoke systems. We also test whether these relationships have changed over time. Examining 4,000 U.S. hospitals during 1998 to 2010, we find no evidence that system members exhibit lower costs. However, members of smaller systems are lower cost than larger systems, and hospitals in centralized systems are lower cost than everyone else. There is no evidence that the system's spatial configuration is associated with cost, although national system hospitals exhibit higher costs. Finally, these results hold over time. We conclude that while systems in general may not be the solution to lower costs, some types of systems are.
AB - Hospital system formation has recently accelerated. Executives emphasize scale economies that lower operating costs, a claim unsupported in academic research. Do systems achieve lower costs than freestanding facilities, and, if so, which system types? We test hypotheses about the relationship of cost with membership in systems, larger systems, and centralized and local hub-and-spoke systems. We also test whether these relationships have changed over time. Examining 4,000 U.S. hospitals during 1998 to 2010, we find no evidence that system members exhibit lower costs. However, members of smaller systems are lower cost than larger systems, and hospitals in centralized systems are lower cost than everyone else. There is no evidence that the system's spatial configuration is associated with cost, although national system hospitals exhibit higher costs. Finally, these results hold over time. We conclude that while systems in general may not be the solution to lower costs, some types of systems are.
KW - centralization
KW - hospital system
KW - hub-and-spoke
KW - operating cost
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U2 - 10.1177/1077558715583789
DO - 10.1177/1077558715583789
M3 - Article
C2 - 25904540
AN - SCOPUS:84930835259
SN - 1077-5587
VL - 72
SP - 247
EP - 272
JO - Medical Care Research and Review
JF - Medical Care Research and Review
IS - 3
ER -