The effects of group size and group economic factors on collaboration: A study of the financial performance of rural hospitals in consortia

Study Questions. To determine factors that distinguish effective rural hospital consortia from ineffective ones in terms of their ability to improve members' financial performance. Two questions in particular were addressed: (1) Do large consortia have a greater collective impact on their members? (2) Does a consortium's economic environment determine the degree of collective impact on members? Data Sources and Study Setting. Based on the hospital survey conducted during February 1992 by the Robert Wood Johnson Hospital- Based Rural Health Care project of rural hospital consortia. The survey data were augmented with data from Medicare Cost Reports (1985-1991), AHA Annual Surveys (1985-1991), and other secondary data. Study Design. Dependent variables were total operating profit, cost per adjusted admission, and revenue per adjusted admission. Control variables included degree of group formalization, degree of inequality of resources among members (group asymmetry), affiliation with other consortium group(s), individual economic environment, common hospital characteristics (bed size, ownership type, system affiliation, case mix, etc.), year (1985-1991), and census region dummies. Principal Findings. All dependent variables have a curvilinear association with group size. The optimum group size is somewhere in the neighborhood of 45. This reveals the benefits of collective action (i.e., scale economies and/or synergy effects) and the issue of complexity as group size increases. Across analyses, no strong evidence exists of group economic environment impacts, and the environmental influences come mainly from the local economy rather than from the group economy. Conclusion. There may be some success stories of collaboration among hospitals in consortia, and consortium effects vary across different collaborations. Relevance/Impact. When studying consortia, it makes sense to develop a typology of groups based on some performance indicators. The results of this study imply that government, rural communities, and consortium staff and steering committees should forge the consortium concept by expanding membership in order to gain greater financial benefits for individual hospitals.