In a recently published study my co-authors and I consider the deductive configuration perspective and distinguish high and low quality hospitals by using clinical and experiential quality as two dimensions of quality capability. We examine the impact of healthcare network size on operating costs of hospitals. Additionally, we investigate the interaction effect of hospital demand and healthcare network size on operating costs. The results of this study show that quality laggards experience lower costs per day through their affiliation with larger healthcare networks, but experiential quality focusers and clinical quality focusers experience higher costs. In contrast to our hypothesis, affiliation with a large healthcare network does not adversely affect the operating costs of holistic quality leaders. We show that clinical quality focusers and holistic quality leaders can complement the effect of network size and hospital demand to reduce their operating costs. However, quality laggards and experiential quality focusers do not observe a reduction in their costs due to the complementary effects of network size and hospital demand.
Our results offer important theoretical and managerial implications that we discuss next. Healthcare networks are becoming ubiquitous. Even distinct health systems that can either take the form of a diversified single hospital system or multi-hospital system comprising of two or more hospitals owned, leased, sponsored, or contract managed by a central organization are entering into network arrangements. By being part of a network quality laggards may gain additional patients, which helps in increasing their resource utilization levels. In addition, the ability to learn best practices from other hospitals in the network further helps in reducing their operating costs. The marginal cost for these hospitals to be part of a network is low. However, experiential quality focusers and clinical quality focusers face the challenge of coordinating with other hospitals in the network while at the same time maintaining their quality levels. While health systems have a central governance structure, health networks do not have this ability to exert centralized control for efficiency. Hence, operations of healthcare networks require hospitals to complement their network-based benefits with their demand. Holistic quality leaders are especially well positioned to gain this complementary benefit. The clinical process of care and the practices that are aimed at enhancing patient experience are synergistic. These quality leaders attract larger numbers of patients by their intrinsic quality characteristics and network effects; however, they stand in good stead to achieve demand-based utilization levels and reduce the coordination burden of affiliation with large healthcare networks.
Growth in hospital networks, healthcare demand, and experiential learning calls attention to a better understanding of the relationship between a hospital’s holistic quality profile and its ability to gain benefits from healthcare network. This research sheds some important insights in this domain. There has been increasing evidence suggesting that hospitals must carefully manage both clinical and experiential quality. By focusing on both clinical and experiential quality, unlike experiential quality focusers and clinical quality focusers, holistic quality leaders are not adversely affected by the size of their network. Our results suggest that experiential quality focusers and clinical quality focusers should either embrace holistic quality management or restrict the size of their networks to maintain their quality level and to reduce coordination costs.