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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.

This chapter investigates whether signing more hospital contracts with Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), hospital affiliation in a system, having more system hospital members located in the same area, and increased competition from area hospitals, contributes to improvements in the cost efficiency of U.S. Midwestern hospitals. Hospitals may offer HMOs and PPOs discounts on contracts to provide health care services to firm employees enrolled in HMOs and PPOs (discounts would lead to smaller price mark-ups over costs for hospital services). Enacting policies to enhance cost efficiency may help hospitals maintain a specified level of profits.

Over the last decade, the United States (US) hospital industry has become increasingly consolidated through the formation of multi-hospital health systems and networks and the legal merger of institutions under a single license. In relation to the former, health networks are strategic alliances or contractual affiliations of hospitals, in which affiliated institutions retain their individual ownership. Health systems, on the other hand, typically own and operate a core set of hospitals that offer an array of services and products. In many markets across the country, there are now only three to five hospital organizations in operation, after one accounts for their combined ownership or network affiliations.

The long-term financial stability of hospital systems represents a “grand challenge” in health care. New ownership forms, such as private equity (PE), promise to achieve better financial performance than nonprofit or for-profit systems. In this study, we compare two systems with many similarities, but radically different ownership structures, missions, governance, and merger and acquisition (M&A) strategies. Both were nonprofit, religious systems serving low-income communities – Montefiore Health System and Caritas Christi Health Care.

Montefiore's M&A strategy was to invest in local hospitals and create an integrated regional system, increasing revenues by adding primary doctors and community hospitals as feeders into the system and achieving efficiencies through effective resource allocation across specialized units. Slow and steady timing of acquisitions allowed for organizational learning and balancing of debt and equity. By 2019, it owned 11 hospitals with 40,000 employees and had strong positive financials and low reliance on debt.

By contrast, in 2010, PE firm Cerberus Capital bought out Caritas (renamed Steward Health Care System) and took control of the Board of Directors, who set the system's strategic direction. Cerberus used Steward as a platform for a massive debt-driven acquisition strategy. In 2016, it sold off most of its hospitals’ property for $1.25 billion, leaving hospitals saddled with long-term inflated leases; paid itself almost $500 million in dividends; and used the rest for leveraged buyouts of 27 hospitals in 9 states in 3 years. The rapid, scattershot M&A strategy was designed to create a large corporation that could be sold off in five years for financial gain – not for health care integration. Its debt load exploded, and by 2019, its financials were deeply in the red. Its Massachusetts hospitals were the worst financial performers of any system in the state. Cerberus exited Steward in 2020 in a deal that left its physicians, the new owners, holding the debt.

The hospital industry is again experiencing a wave of consolidation as formerly independent hospitals are acquired by multihospital systems. The effects of these consolidations on operating costs and care quality have been researched extensively. However, in addition to these benefits, many hospitals also hope that joining a multihospital system will improve their access to capital. Improved access to capital could be a particularly important benefit for independent, not-for-profit (NFP) hospitals because these hospitals face capital constraints since they lack access to publicly issued equity. Despite being an often-cited benefit of system membership, access to capital has received little attention from researchers. We draw on financial theory to identify several mechanisms through which system membership might improve access to capital for acquired NFP hospitals. We develop and test hypotheses using data from an earlier period of hospital consolidation during which hospitals were even more financially constrained than they are at present. Using propensity score matched control hospitals, we examine changes in leverage that occurred after independent hospitals joined multihospital systems. We find evidence that system membership allows under-leveraged hospitals to increase their debt holdings, suggesting that system membership may help NFP hospitals attain an optimal capital structure.

Researchers recommend a reorganization of the medical profession into larger groups with a multispecialty mix. We analyze whether there is evidence for the superiority of these models and if this organizational transformation is underway.

We summarize the evidence on scale and scope economies in physician group practice, and then review the trends in physician group size and specialty mix to conduct survivorship tests of the most efficient models.

The distribution of physician groups exhibits two interesting tails. In the lower tail, a large percentage of physicians continue to practice in small, physician-owned practices. In the upper tail, there is a small but rapidly growing percentage of large groups that have been organized primarily by non-physician owners.

While our analysis includes no original data, it does collate all known surveys of physician practice characteristics and group practice formation to provide a consistent picture of physician organization.

Our review suggests that scale and scope economies in physician practice are limited. This may explain why most physicians have retained their small practices.

Larger, multispecialty groups have been primarily organized by non-physician owners in vertically integrated arrangements. There is little evidence supporting the efficiencies of such models and some concern they may pose anticompetitive threats.

This is the first comprehensive review of the scale and scope economies of physician practice in nearly two decades. The research results do not appear to have changed much; nor has much changed in physician practice organization.

Purpose – The paper explains how internal reporting systems, as embedded practices informing organizational actions and “know-how”, contributed to the inertia in implementing a corporate form of governance in a transitional public organization in a developing country – Egypt.

Design/methodology/approach – The paper synthesizes an institutional theory framework in order to capture the case study mixed results. Drawing on DiMaggio and Powell's (1983) notions of isomorphic mechanisms, Ocasio (1999) and Burns and Scapens’ (2000) notions of organizations’ memory, history, cumulative actions and routines, Brunsson's (1994) notion of organizational institutional confusion as well as Carruthers's (1995) notion of “symbolic window-dressing” adoption of new practices, the paper explores the dynamic of a public hospital corporatization processes. Data collection methods include semi-structured interviews, documentary evidence and direct observation.

Findings – The case study evidence shows that the interplay between the new form of “corporate” governance and the intra-organizational power, routines and “know-how” created internal organizational confusion and changed organizational members’ narrative of risk and uncertainties.

Research limitations/implications – The paper does not reveal the role of reformers involved in the public sector “governance” reform in developing countries. Exploring such a role goes beyond the scope of this paper and represents an area of future research.

Originality/value – The paper provides a comprehensive account of public sector “governance” reform in a developing nation, while exploring the role of management accounting and costing systems in facilitating or otherwise that reform processes.

Change in ownership among U.S. community hospitals has been frequent and, not surprisingly, remains an important issue for both researchers and public policy makers. In the past, investor-owned hospitals were long suspected of pursuing financial over other goals, culminating in several reviews that found few differences between for-profit and nonprofit forms (Gray, 1986; Sloan, 2000; Sloan, Picone, Taylor, & Chou, 2001). Nevertheless, continuing to the present day, several states prohibit investor-ownership of community hospitals. Conversions to investor-ownership are only one of six types of ownership change, however, with relatively less attention paid to the other types (e.g., for-profit to nonprofit, public to nonprofit). This study has two parts. We first review the literature on the various types of ownership conversion among community hospitals. This review includes the rate at which conversions occur over time, the relative frequency in conversions between specific ownership categories and the observed effects of conversion on hospital operations (e.g., strategic direction and decision-making processes) and performance (e.g., access, quality, and cost). Overall, we find that the impact of ownership conversion on the different measures is mixed, with slightly greater evidence for positive effects on hospital efficiency. As one explanation for these findings, we suggest that the impact of ownership conversion on hospital performance may be mediated by changes in the hospital's strategic content and process. Such a hypothesis has not been proposed or examined in the literature. To address this gap, we next study the role of strategic reorientation following hospital conversion in a field study. We conceptualize ownership conversion within a strategic adaptation framework, and then analyze the changes in strategy content and process across sixteen hospitals that have undergone ownership conversions from nonprofit to for-profit, public to for-profit, public to nonprofit, and for-profit to nonprofit. The field study findings delineate the strategic paths and processes implemented by new owners post-conversion. We find remarkable similarity in the content of strategies undertaken but differences in the process of strategic decision making associated with different types of ownership changes. We also find three main performance effects: hospitals change ownership for financial reasons, experience increases in revenues and capital investment post-conversion, and pursue labor force reductions post-conversion. Membership in a multi-hospital system, however, may be a major determinant of both strategy content and decision-making process that is confounded with ownership change. That is, ownership conversion may mask the impact of system membership on a hospital's strategic actions. These findings may explain the pattern of performance effects observed in the literature on ownership conversions.

We present a description and analysis of the current reforms in the French system of “assurance maladie”, or its health insurance system, particularly as they bear on quality at the hospital level. The measurement and management of quality play a significant role in the reform, thus providing a particularly timely example for health care policy makers, researchers, and managers. We discovered several lessons from the French experience. First, the issue of workload influenced thinking about how best to build a given indicator, and led to careful evaluation of the added value of additional data collection. In some cases the indicators are actually more of a screen or filter than an actual assessment of quality, with particularly high or low values signaling the need for further investigation rather than serving as assessments per se. Second, the development and implementation of quality indicators (QIs) demand the involvement of professionals in the process. Third, process indicators seemed to be more useful than outcome indicators. Fourth, expectations for quality management should be aligned with feasibility and with the reality of measurement system. For example, the workload is closely tied to the state of the hospital data collection systems (indicators selection). Lastly, the twin objectives of quality improvement and accountability do not necessarily mesh easily or well.

The possibility of a bioterrorism event haunts all healthcare organizations. We believe a bioterrorism event is more likely in an urban area, and that urban multiprovider systems will be the “first line healthcare responders.” Due to the lack of empirical research on this topic and firsthand experience with a bioterrorism event, this paper will provide the theoretical underpinnings to support the rationale for multiprovider systems as “first responders.” This chapter outlines the nature and challenges of bioterrorism for a healthcare organization, the likely “state of the art” preparations for such events on the part of the four categories of healthcare organizations, and finally, the implications for the structuring of multiprovider systems to enhance their ability to plan for, and respond to bioterrorism events. Potential future research issues are also addressed.