Does System Membership Enhance Financial Performance In Hospitals?

While hospitals continue to join multi-institutional systems, empirical data on the benefits of system membership are ambiguous. This study examines the same 166 Florida hospitals in 1986 and 1992. System membership, in general, did not enhance financial returns (measured by operating margin, total margin, and return on assets) for the pooled data or for either year. In fact, a significant negative relationship is noted in 1986. However, when only hospitals affiliated with national systems (in this study, American Medical International, Hospital Corporation of America, or Humana) are analyzed, a positive statistically significant association is found for two of the above three profitability indicators for both the pooled data and for 1986. However, there was no statistically significant impact noted for 1992. Reasons for the apparent discrepancy in the impact of national versus local/regional systems on hospital financial performance and the apparent declining ability of national systems to generate above-average returns are explored