Patient care effectiveness and financial outcomes of hospital physician contracting emphasis

Abstract

Abstract This study investigates the influence of hospitals' physician contracting emphasis on patient care effectiveness and financial outcomes. It utilizes secondary data for a comprehensive set of hospitals in the United States over a 21‐year period (1996–2016). Analysis confirms that hospitals with a greater emphasis on physician contracting have higher operating margins but also tend to have longer patient length of stay—indicating lower patient care effectiveness. Lower patient care effectiveness, in turn, is observed to attenuate some of the financial gains from physician contracting. Further, post hoc analysis with other measures of patient care, including experiential quality, conformance quality, readmissions, and mortality provide additional insights into the effect of physician contracting on patient care. Theory and results also highlight teaching intensity and capacity utilization of hospitals as key boundary conditions in these relationships, revealing a complex set of findings related to these variables. Together, the findings yield practical insights for hospital managers regarding their operations strategy.