Better to receive than to give? Interorganizational service arrangements and hospital performance.

Background: The literature points to possible efficiencies in local-hospital-system performance, but little is known about the internal dynamics that might contribute to this. Study of the service arrangements that nearby same-system hospitals have with one another should provide clues into how system efficiencies might be attained.

Purposes: The purpose of this research was to better understand the financial and operational effects of service sharing and receiving arrangements among nearby hospitals belonging to the same systems.

Methodology/approach: Data are compiled for the 1,227 U.S. urban acute care hospitals that belong to multihospital systems. A longitudinal structural equation model is employed-environmental pressures and organizational characteristics in 1997 are associated with service sharing and receiving arrangements in 2000; service sharing and receiving arrangements are then associated with performance in 2003. Service sharing and receiving are measured by counts of services focal hospitals report that are not duplicated by other-system hospitals within the same county. Linear Structural Relations (LISREL) is used to estimate the model.

Findings: In general, market competition from managed care and hospitals influences hospitals to exchange services. For individual hospitals, service sharing has no effects on operational efficiency and financial performance. Service receiving, however, is related to greater efficiencies and higher profits.

Practice Implications: The findings underscore the asymmetrical relationships that exist among local-system hospitals. Individual hospitals benefit from service receiving arrangements but not from sharing arrangements-it is better to receive than to give. To the extent that individual hospitals independently determine service capacities, systems may not be able to effectively rationalize service offerings.