Contract management in USA hospitals: service duplication and access within local markets

Abstract

This paper examines the extent to which hospitals that are under external contract management engage in service duplication, as well as the degree to which the various services they offer contribute to or detract from community access. The study incorporates all USA hospitals using data from the American Hospital Association Annual Survey Database, supplemented by county level measures obtained from the area resource file (ARF). Using data on the 3794 hospitals classified as acute care facilities in 2002, we performed a set of logistic regressions that analyzed whether a hospital offered each of 74 distinct services. For each service (regression), key independent variables measured the number of other hospitals in the local market area that also offered the service. Local area market definitions are the areas circumscribed by the hospital within distances of 10 and 20 miles. Results suggest that contract-managed (CM) hospitals display a more competitive pattern (service duplication) than hospitals in general, but CM hospitals that are the sole provider of services locally are less likely to offer services than traditionally managed sole hospital providers. Contract management does not appear to offer any particular advantages in improving access to hospital services.

An Analysis of the Effects of Intra‐ and Interorganizational Arrangements on Hospital Supply Chain Efficiency

“…A third arrangement is contract management. This refers to arrangements where a hospital contracts with an external organization that assumes responsibility for managing all operational activities of the hospital (Carey and Dor ; Fink and Edmiston ). The contract management firm provides a management team that reports to the hospital's governing board.…”

“…Like systems, contract management firms are in a position to achieve economies in purchasing supplies by pooling the purchasing requests of the hospitals with whom they contract. Although no studies have looked specifically at the impact of contract management on hospitals’ supply chain efficiency, there is some recent evidence that contract management is associated with better hospital operating efficiency in general (Carey and Dor ). Given that contract management firms are typically retained to improve hospital operations, and supply chain is both a large cost component of hospital operations and one that offers substantial opportunities for improvement, it stands to reason that this would be an area for which contract management firms could make a difference.…”