Ferhat D Zengul1, Robert Weech-Maldonado, Bunyamin Ozaydin, Patricia A Patrician, Stephen J OʼConnor. 1. Ferhat D. Zengul, PhD, MBA, is Assistant Professor, Department of Health Services Administration, University of Alabama at Birmingham. E-mail: ferhat@uab.edu. Robert Weech-Maldonado, PhD, MBA, is Professor and L.R. Jordan Endowed Chair of Health Administration, Department of Health Services Administration, University of Alabama at Birmingham. Bunyamin Ozaydin, PhD, is Assistant Professor, Department of Health Services Administration, University of Alabama at Birmingham. Patricia A. Patrician, PhD, RN, FAAN, is Donna Brown Banton Endowed Professor, Department of Family, Community Health and Systems, University of Alabama at Birmingham. Stephen J. O'Connor, PhD, FACHE, is Professor, Department of Health Services Administration, University of Alabama at Birmingham.
Abstract
BACKGROUND: U.S. hospitals have been investing in high-technology medical services as a strategy to improve financial performance. Despite the interest in high-tech medical services, there is not much information available about the impact of high-tech services on financial performance. PURPOSE: The aim of this study was to examine the impact of high-tech medical services on financial performance of U.S. hospitals by using the resource-based view of the firm as a conceptual framework. METHODOLOGY/APPROACH: Fixed-effects regressions with 2 years lagged independent variables using a longitudinal panel sample of 3,268 hospitals (2005-2010). It was hypothesized that hospitals with rare or large numbers (breadth) of high-tech medical services will experience better financial performance. FINDINGS: Fixed effects regression results supported the link between a larger breadth of high-tech services and total margin, but only among not-for-profit hospitals. Both breadth and rareness of high-tech services were associated with high total margin among not-for-profit hospitals. Neither breadth nor rareness of high-tech services was associated with operating margin. Although breadth and rareness of high-tech services resulted in lower expenses per inpatient day among not-for-profit hospitals, these lower costs were offset by lower revenues per inpatient day. PRACTICE IMPLICATIONS: Enhancing the breadth of high-tech services may be a legitimate organizational strategy to improve financial performance, especially among not-for-profit hospitals. Hospitals may experience increased productivity and efficiency, and therefore lower inpatient operating costs, as a result of newer technologies. However, the negative impact on operating revenue should caution hospital administrators about revenue reducing features of these technologies, which may be related to the payer mix that these technologies may attract. Therefore, managers should consider both the cost and revenue implications of these technologies.
BACKGROUND: U.S. hospitals have been investing in high-technology medical services as a strategy to improve financial performance. Despite the interest in high-tech medical services, there is not much information available about the impact of high-tech services on financial performance. PURPOSE: The aim of this study was to examine the impact of high-tech medical services on financial performance of U.S. hospitals by using the resource-based view of the firm as a conceptual framework. METHODOLOGY/APPROACH: Fixed-effects regressions with 2 years lagged independent variables using a longitudinal panel sample of 3,268 hospitals (2005-2010). It was hypothesized that hospitals with rare or large numbers (breadth) of high-tech medical services will experience better financial performance. FINDINGS: Fixed effects regression results supported the link between a larger breadth of high-tech services and total margin, but only among not-for-profit hospitals. Both breadth and rareness of high-tech services were associated with high total margin among not-for-profit hospitals. Neither breadth nor rareness of high-tech services was associated with operating margin. Although breadth and rareness of high-tech services resulted in lower expenses per inpatient day among not-for-profit hospitals, these lower costs were offset by lower revenues per inpatient day. PRACTICE IMPLICATIONS: Enhancing the breadth of high-tech services may be a legitimate organizational strategy to improve financial performance, especially among not-for-profit hospitals. Hospitals may experience increased productivity and efficiency, and therefore lower inpatient operating costs, as a result of newer technologies. However, the negative impact on operating revenue should caution hospital administrators about revenue reducing features of these technologies, which may be related to the payer mix that these technologies may attract. Therefore, managers should consider both the cost and revenue implications of these technologies.