Impact of Network and System Use on Hospital X-Inefficiency

A significant part of the restructuring in the health care industry has involved hospitals joining health networks and health systems. While the proclaimed purpose of this strategy has been to improve hospital performance, studies have found that not all member hospitals reap the desired outcomes. Variations in performance have been linked to, among other things, service provision at the network/system level versus individual hospital level. This study examined the impact of network and system use to provide services on hospital X-inefficiency (i.e., the difference between actual and optimal costs) in a national sample (n = 1,368) of U.S. urban, general, hospitals. Stochastic frontier analysis (SFA) revealed a mean hospital X-inefficiency of 14.85%. Results suggest that hospitals providing a moderate to high proportion of services at the network or system level were more efficient than hospitals that did not use networks or systems for service provision. Low users of networks or systems and nonusers had comparable levels of efficiency.