A Model for the Assessment of Multi-Hospital Systems vs. Freestanding Institutions

Date of Submission


Document Type


Degree Name

Doctor of Science in Management Systems (Sc.D.)




W. Pan

Committee Member

B. Judd

Committee Member

J. Phelan

LC Subject Headings

Multihospital systems, Hospitals--Administration

Call No. at the Univ. of New Haven Library

AS 36 N290 Mgmt. Syst. 1996 no.3


In 1993 system hospitals' comprised more than 40% of all hospitals in the U.S. as reported by the American Hospital Association. Figure 1 shows the diversity of this segment of the heath care market. Increased financial pressure including the Medicare Prospective Payment System initiated in 1983 and increased numbers of uninsured patients have forced smaller freestanding community hospitals to band together to stay alive. The question of a hospital system providing more benefits and adding value over the more conventional freestanding hospital needs to be assessed empirically. The benefits normally referred to in literature include access to care, quality care, increased profitability, higher productivity, and the ability to attract top managerial talent. Studies conducted in the eighties rejected the concept of systems adding value. (Shortell, Morrison, Friedman, 1988). The past studies looked at measures of added value such as cost, productivity, and quality in isolation rather than from an overall added value perspective and show mixed results dependent upon which measure was utilized.

This study examined a theorized relationship between Multi-Hospital Systems and Added Value using several variables that define the hospital; ownership type, size, teaching status, and status in a Multi-Hospital System. This research advances the understanding of the value of multi-hospital systems and the significance of several measures used to define added-value. It provides empirical evidence to indicate whether the multi-hospital system has achieved superior levels of added-value in the areas of cost, productivity and quality to differentiate multi-hospital systems as an added-value leader in the industry. Two measures of added value that combine cost, productivity and quality were developed and tested in this study.

Sixteen separate research hypothesis were tested to investigate if differences exist between system affiliated hospitals and freestanding facilities. The levels of analysis included teaching status, size, and ownership with the basic hypothesis for each level of analysis being;

H0 : There is no difference in added value between system and non-system hospitals

HA : There is some difference in added value between system and non-system hospitals

Using two added value constructs, an additive model and a regression model this study found no added value due to system affiliation at the 5% level. Further the study found no added value in the categories of ownership, teaching status or size. These findings are compared to historical methods evaluating differences based upon the isolated measures of cost productivity and quality, and an 'economic only' model using cost and productivity.