The financial performance of hospitals belonging to health networks and systems

The U.S. health industry is experiencing substantial restructuring through ownership consolidation and development of new forms of interorganizational relationships. Using an established taxonomy of health networks and system s, this paper develops and tests four hypotheses related to hospital financ ial performance. Consistent with our predictions, we find that hospitals in health systems that had unified ownership generally had better financial p erformance than hospitals in contractually based health networks. Among hea lth network hospitals, those belonging to highly centralized networks had b etter financial performance than those belonging to more decentralized netw orks. However, health system hospitals in moderately centralized systems pe rformed better than those in highly centralized systems. Finally, hospitals in networks or systems with little differentiation or centralization exper ienced the poorest financial performance. These results are consistent with resource dependence, transaction cost economics, and institutional theorie s of organizational behavior; and provide a conceptual and empirical baseli ne for future research.