Examining Governance in Hospital Operations: The Effects of Trust and Physician Employment in Achieving Efficiency and Patient Satisfaction

ABSTRACT Governance can be challenging in healthcare operations, particularity when attending physicians lack financial relationships with the hospital. In the absence of formal incentive system mechanisms, it may be possible to use informal relational governance to synchronize activities. We use Relational Resource Based View and Agency theory to conceptualize trust (an informal governance mechanism) and physician employment (a formal governance mechanism) as moderators of key operational phenomena in hospitals. Specifically, we test the moderated effects of trust and physician employment on the relationships among lean strategy, process integration, operational efficiency, and patient satisfaction. Analysis of 583 data points from 302 acute care U.S. hospitals reveals that lean strategy impacts process integration, and process integration impacts operational efficiency and patient satisfaction. Trust enhances the positive relationship between lean strategy and process integration such that the relationship is stronger when physicians are employed by the hospital and weaker when physicians are not employed by the hospital. A post hoc analysis reveals that physician employment also influences how process integration affects patient satisfaction. Our results explain the key roles of trust, physician employment, and integration in linking strategy and outcomes. Practitioner interviews validate and help to tease out the implications of our findings. This study contributes important insights for researchers, executives, and policy makers interested in governance and improvements in healthcare delivery.