Specialty hospitals emulating focused factories A case study

Specialty hospitals emulating focused factories A case study Purpose – For 15 years general hospital managers faced new competition from for‐profit specialty hospitals that operate on a “focused factory” model, which threaten to siphon‐off the most profitable patients. This paper aims to discuss North American specialty hospitals and to review rising costs impact on general hospital operations. The focus is to discover whether specialty hospitals are more efficient than general hospitals; if so, how significant is the difference and also what can general hospitals do in light of the rising specialty hospitals. Design/methodology/approach – The case study involves stochastic frontier regression analysis using Cobb‐Douglas and Translog cost functions to compare Minnesota general and specialty hospital efficiency. Analysis is based on data from 117 general and 19 specialty hospitals. Findings – The results suggest that specialty hospitals are significantly more efficient than general hospitals. Overall, general hospitals were found to be more than twice as inefficient compared with specialty hospitals in the sample. Some cost‐cutting factors highlighted can be implemented to trim rising costs. Practical implications – The case study highlights some managerial levers that general hospital operational managers might use to control rising costs. This also helps them compete with specialty hospitals by reducing overheads and other major costs. Originality/value – The study is based on empirical modeling for an important healthcare operational challenge and provides additional in‐depth information that has health policy implications. The analysis and findings enable healthcare managers to guide their institutions in a new direction during a time of change within the industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Health Care Quality Assurance Emerald Publishing

Specialty hospitals emulating focused factories A case study

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
0952-6862
DOI
10.1108/09526861011010703
Publisher site
See Article on Publisher Site

Abstract

Purpose – For 15 years general hospital managers faced new competition from for‐profit specialty hospitals that operate on a “focused factory” model, which threaten to siphon‐off the most profitable patients. This paper aims to discuss North American specialty hospitals and to review rising costs impact on general hospital operations. The focus is to discover whether specialty hospitals are more efficient than general hospitals; if so, how significant is the difference and also what can general hospitals do in light of the rising specialty hospitals. Design/methodology/approach – The case study involves stochastic frontier regression analysis using Cobb‐Douglas and Translog cost functions to compare Minnesota general and specialty hospital efficiency. Analysis is based on data from 117 general and 19 specialty hospitals. Findings – The results suggest that specialty hospitals are significantly more efficient than general hospitals. Overall, general hospitals were found to be more than twice as inefficient compared with specialty hospitals in the sample. Some cost‐cutting factors highlighted can be implemented to trim rising costs. Practical implications – The case study highlights some managerial levers that general hospital operational managers might use to control rising costs. This also helps them compete with specialty hospitals by reducing overheads and other major costs. Originality/value – The study is based on empirical modeling for an important healthcare operational challenge and provides additional in‐depth information that has health policy implications. The analysis and findings enable healthcare managers to guide their institutions in a new direction during a time of change within the industry.

Journal

International Journal of Health Care Quality AssuranceEmerald Publishing

Published: Jan 12, 2010

Keywords: Hospitals; United States of America; Health and medicine

References

  • How reliable are hospital efficiency estimates? Exploiting the dual to homothetic production
    Folland, S.T.; Hofler, R.A.

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