The changing configuration of hospital systems: centralization, federalization, or fragmentation?

PURPOSE Research on hospital system organization is dated and cross-sectional. We analyze trends in system structure during 2000-2010 to ascertain whether they have become more centralized or decentralized. DESIGN/METHODOLOGY/APPROACH We test hypotheses drawn from organization theory and estimate empirical models to study the structural transitions that systems make between different "clusters" defined by the American Hospital Association. FINDINGS There is a clear trend toward system fragmentation during most of this period, with a small recent shift to centralization in some systems. Systems decentralize as they increase their members and geographic dispersion. This is particularly true for systems that span multiple states; it is less true for smaller regional systems and local systems that adopt a hub-and-spoke configuration around a teaching hospital. RESEARCH LIMITATIONS Our time series ends in 2010 just as health care reform was implemented. We also rely on a single measure of system centralization. RESEARCH IMPLICATIONS Systems that appear to be able to centrally coordinate their services are those that operate in local or regional markets. Larger systems that span several states are likely to decentralize or fragment. PRACTICAL IMPLICATIONS System fragmentation may thwart policy aims pursued in health care reform. The potential of Accountable Care Organizations rests on their ability to coordinate multiple providers via centralized governance. Hospitals systems are likely to be central players in many ACOs, but may lack the necessary coherence to effectively play this governance role. ORIGINALITY/VALUE Not all hospital systems act in a systemic manner. Those systems that are centralized (and presumably capable of acting in concerted fashion) are in the minority and have declined in prevalence over most of the past decade.

[1]  Sumantra Ghoshal,et al.  The Individualized Corporation , 1997 .

[2]  David Dranove,et al.  Hospital consolidation and costs: another look at the evidence. , 2003, Journal of health economics.

[3]  Henrich R. Greve,et al.  Multiunit Organization and Multimarket Strategy , 2001 .

[4]  Ateev Mehrotra,et al.  Do Integrated Medical Groups Provide Higher-Quality Medical Care than Individual Practice Associations? , 2006, Annals of Internal Medicine.

[5]  Herbert A. Simon,et al.  Information-Processing Theory of Human Problem Solving , 1978 .

[6]  Kristin Madison,et al.  Multihospital system membership and patient treatments, expenditures, and outcomes. , 2004, Health services research.

[7]  D. Kennedy,et al.  Aligning Academic and Clinical Missions Through an Integrated Funds-Flow Allocation Process , 2007, Academic medicine : journal of the Association of American Medical Colleges.

[8]  L. Burns,et al.  Integrated delivery networks: a detour on the road to integrated health care? , 2002, Health affairs.

[9]  F. Scherer,et al.  The Economics of Multiplant Operation , 1977 .

[10]  David A. Anderson,et al.  The new world of managed care: creating organized delivery systems. , 1994, Health affairs.

[11]  S. Shortell,et al.  Tracking the changing provider landscape: implications for health policy and practice. , 2001, Health affairs.

[12]  L. Burns,et al.  The impact of hospital ownership conversions: Review of the literature and results from a comparative field study , 2009 .

[13]  Panle Jia,et al.  What Happens When Wal‐Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry , 2008 .

[14]  Pino G. Audia,et al.  TRADEOFFS IN THE ORGANIZATION OF PRODUCTION : MULTI-UNIT FIRMS , GEOGRAPHIC DISPERSION AND ORGANIZATIONAL LEARNING , 2000 .

[15]  J. Goes,et al.  Why Integrated Health Networks Have Failed , 2001, Frontiers of health services management.

[16]  Emek Basker,et al.  The Causes and Consequences of Wal-Mart's Growth , 2007 .

[17]  Kathleen M. Carley,et al.  Intra-organizational Complexity and Computation , 2001 .

[18]  Stephen M Shortell,et al.  Measuring the medical home infrastructure in large medical groups. , 2008, Health affairs.

[19]  S. Shortell,et al.  The financial performance of hospitals belonging to health networks and systems. , 2000, Inquiry : a journal of medical care organization, provision and financing.

[20]  L. Greiner.  Evolution and Revolution as Organizations Grow , 1997 .

[21]  Roice D Luke.  Taxonomy of health networks and systems: a reassessment. , 2006, Health services research.

[22]  S M Shortell,et al.  Classifying health networks and systems: managerial and policy implications. , 2000, Health care management review.

[23]  C. Handy.  Balancing corporate power: a new Federalist paper. , 1992, Harvard business review.

[24]  E. Brynjolfsson,et al.  Beyond Computation: Information Technology, Organizational Transformation and Business Performance , 2000 .

[25]  M. Shanley,et al.  Are multihospital systems more efficient? , 1996, Health affairs.

[26]  Linda Dynan,et al.  Two Decades of Organizational Change in Health Care: What Have we Learned? , 2004, Medical care research and review : MCRR.

[27]  S L Walston,et al.  Just how integrated are integrated delivery systems? Results from a national survey. , 2001, Health care management review.

[28]  S M Shortell,et al.  Conceptualizing and measuring integration: findings from the health systems integration study. , 1993, Hospital & health services administration.

[29]  Frederic M. Scherer,et al.  The Economics of Multi-Plant Operation. , 1977 .

[30]  K. Carey.  Hospital Cost Efficiency and System Membership , 2003, Inquiry : a journal of medical care organization, provision and financing.

[31]  P. Samouel,et al.  Do Diseconomies of Scale Impact Firm Size and Performance? A Theoretical and Empirical Overview , 2006 .

[32]  G. Bazzoli,et al.  Hospital Inefficiency: What is the Impact of Membership in Different Types of Systems? , 2007, Inquiry : a journal of medical care organization, provision and financing.

[33]  Stephen M Shortell,et al.  Reexamining organizational configurations: an update, validation, and expansion of the taxonomy of health networks and systems. , 2004, Health services research.

[34]  D. Tennyson,et al.  Does System Membership Enhance Financial Performance in Hospitals? , 2000, Medical care research and review : MCRR.

[35]  Jay R. Galbraith.  Organization Design: An Information Processing View , 1974 .

[36]  M. Joshi,et al.  Variation in quality of care within health systems. , 2008, Joint Commission journal on quality and patient safety.

[37]  S M Shortell,et al.  Remaking health care in America. , 1996, Hospitals & health networks.

[38]  S M Shortell,et al.  A taxonomy of health networks and systems: bringing order out of chaos. , 1999, Health services research.

[39]  G. Bazzoli,et al.  Governance Forms in Health Systems and Health Networks , 2003, Health care management review.

[40]  F. Scherer,et al.  Industrial Market Structure and Economic Performance. , 1971 .

[41]  Gary P. Pisano,et al.  Disrupted Routines: Team Learning and New Technology Adaptation , 2001 .

[42]  Lawton Robert Burns,et al.  Hospital-physician collaboration: landscape of economic integration and impact on clinical integration. , 2008, The Milbank quarterly.

[43]  S M Shortell,et al.  Hospital Reorganization After Merger , 1995, Medical care.

[44]  L. Argote.  Organizational Learning: Creating, Retaining and Transferring Knowledge , 1999 .

[45]  S. Shortell,et al.  Rejoinder to taxonomy of health networks and systems: a reassessment. , 2006, Health services research.

[46]  D. Berwick,et al.  The triple aim: care, health, and cost. , 2008, Health affairs.

[47]  E. Fisher,et al.  Creating accountable care organizations: the extended hospital medical staff. , 2006, Health affairs.

[48]  L. Burns,et al.  The Financial Performance of Integrated Health Organizations , 2005, Journal of healthcare management / American College of Healthcare Executives.

[49]  G. Pisano,et al.  Disrupted Routines: Team Learning and New Technology Implementation in Hospitals , 2001 .

[50]  P. Gertler,et al.  How the expansion of hospital systems has affected consumers. , 2005, Health affairs.

[51]  Gerald J. Miller,et al.  Handbook of strategic management , 2000 .

[52]  L. Burns,et al.  The fall of the house of AHERF: the Allegheny bankruptcy. , 2000, Health affairs.

[53]  Thomas Bodenheimer,et al.  An Empirical Assessment of High-Performing Medical Groups: Results from a National Study , 2005, Medical care research and review : MCRR.

[54]  Claudia H. Williams,et al.  How has hospital consolidation affected the price and quality of hospital care ? , 2006 .