Organizational structure and productive efficiency of non-profit hospitals.

This paper investigates how hospital affiliation in a multi-hospital system (contract managed, owned, sponsored), the number of system hospitals, HMO and PPO contracts, and other factors, impacts hospital cost efficiency. Using a 1996-1999 panel of 248 hospitals, results show that for urban hospitals, increasing the number of hospitals in the system, system ownership and contract management/sponsorship of hospitals in period t-1 do not contribute to improvements in current period (period t) cost efficiency. For rural hospitals, increasing the number of hospitals in the system, system ownership and contract management/sponsorship of hospitals in period t-1 helped enhance current period cost efficiency. JEL Codes: D29, I19, L31 We are grateful to Gary Ferrier, Richard Daniels, participants at the Fifty-fourth International Atlantic Economic Conference in Washington DC the Fourth North American Productivity Workshop at New York University, and seminar participants at the Universities of Arkansas and Florida, for their comments and suggestions. Granderson acknowledges financial support from the Richard T. Farmer School of Business. The authors are responsible for any errors.