Understanding hospital performance: The role of network ties and patterns of competition

Background: To improve efficiency and quality, a number of policies have recently been implemented to increase competition and cooperation within the health systems of many countries. We theorize how hospital performance, measured as productivity, is contingent upon network embeddedness, the extent to which a hospital is involved in a network of interconnected interorganizational relationships. Purpose: The aim of this study was to explore the effects on hospital productivity resulting from both collaborative network ties and competitive relationships between providers. Methodology: We used panel data collected between 2003 and 2007 from 35 hospitals in Abruzzo, one of the most populated regions of central Italy. We used secondary data of hospital activities regarding both clinical and administrative aspects. For each year, we examined the intensity of interhospital competition and the unique position each provider has within a larger network of relationships with other hospitals. Other idiosyncratic organizational characteristics were examined as well. Findings: Our results show that hospital productivity is negatively related to the degree of competition that a hospital faces and positively related to the degree with which hospitals establish collaborative relationships. We also found that the negative impact on hospital productivity due to competition was lessened when hospitals were more likely to create cooperative network ties. Practice Implications: Because interhospital collaboration and competition are related to hospital productivity, they should constitute a core element in the strategic planning of a hospital’s operation. Health administrators should implement policies that favor collaborative network ties at the regional level and mitigate interorganizational rivalries when establishing collaborative relationships with local competitors.