NEW EVIDENCE ON THE PERFORMANCE ADVANTAGES OF MULTIHOSPITAL SYSTEMS

This study analyzes the performance effects of proprietary, multihospi tal systems. It is shown that the organizational structure of these sy stems may affect the operating costs of member hospitals. Estimating a cost function for Florida hospitals and controlling for other factors , the average costs of HUMANA hospitals are empirically about 17 perce nt lower, while the costs of other leading chains are about 12 percent lower than not-for-profit institutions. These results contrast with e arlier studies that found no such differences. Furthermore, the cost d ifferential that exists between system and non-system hospitals can be largely attributed to technical efficiencies arising from chain owner ship.