Dissertation

Essays on Healthcare Operations: Impacts of Focused Operations, Competition, Quality and Cost Efficiency of Hospitals

Song, Junghoon

2018

Overview

A wide range of operations management initiatives are currently being investigated and pursued in U.S. hospitals by both practitioners and academics (Kc and Terwiesch). Even as healthcare providers are being forced to drive down costs, maintaining acceptable levels of quality, while retaining cost efficiency continues to be a major challenge. The objective of this three-essay dissertation is to investigate the impacts of a focused factory approach to healthcare operations, the role of competition as a driver to adopting focused factory approach in healthcare on quality and cost efficiency of large U.S. hospitals, and provide insights on current practices and their efficacy. The first essay investigates the impact of operational focus on quality of care in U.S hospitals, and the determinants of adopting focused operations. The relationship between increasing competition among hospitals and quality performance, and the degree of influence of regional competition on a hospital’s decision to implement a focused factory concept are examined in depth. The concept of a hospital as a ‘focused factory’ has drawn attention in recent years in healthcare management (Herzlinger, Huckman and Zinner, McDermott and Stock). The concept of a focused factory was first articulated in the seminal work of Skinner , in which it was argued that by reducing complexity, manufacturing plants can concentrate on a smaller number of tasks and be more effective and efficient. Specifically, it was argued that a “focused factory does a better job because repetition and concentration in one area allow its workforce and managers to become effective and experienced in the tasks required for success. A focused factory is more manageable and controllable than unfocused plants. Its problems are demanding but limited in scope”. A few studies have portrayed the impacts of the focused factory approach in healthcare environments, and they have reported that hospitals with more focused operations show improved operational performance (Clark and Huckman, Hyer et al., Kc and Terwiesch, McDermott and Stock). It is becoming apparent that hospitals benefit from economies of scale as they focus on fewer services, despite having to give up the advantages from economies of scope as they provide a narrower range of services. It has also been observed that hospitals increasingly do tend to have more focused operations (Eastaugh, Goldberger and Nallamothu). While the focused factory concept in healthcare has begun to be investigated in recent years, existing studies typically focus on just one or a small number of performance outcomes. In our study, we provide a more nuanced understanding of the effects of focused operations on a broader spectrum of quality variables. This allows us to test in which specific area of quality performance the focused factory approach is most effective. In addition, while outcomes of the focused factory have received research attention, the antecedents of the focused factory approach in a healthcare environment have been studied to a much lesser extent. Another area that is related to hospital performance is competition. The impact of competition on hospital performance has long been a point of discussion in medical and healthcare economics literature (Ginzberg, Miller, Mukamel et al., Porter and Teisberg, Rivers and Glover, Zwanziger and Melnick). The majority of past studies has focused on the impact of competition on cost, but not sufficiently on quality of care. As the object of competition shifts from price to non-price aspects (e.g. service availability, quality), we observe a nascent literature on competition in healthcare and its impact on quality performance. However, the results so far have not been consistent. For instance, Gaynor and Town ( find an association between competition and quality. In contrast, Ginzberg (1996) argues that the healthcare marketplace is different than other service industries, so that competition cannot necessarily be a driving force of quality improvement. Mukamel et al. (2001) do not find a significant association between hospital competition and risk-adjusted mortality. While the literature on focused factory in healthcare has demonstrated consistent results on improved quality of care, the impact of competition on quality is still not clear. Accordingly, in this essay, we explore competitive environment as a driving force of focused operations. Specifically, we test whether the focused factory approach is being used as a response to local competition. If so, it may serve to explain the increasing trend (Eastaugh, 2014) towards adoption of focused factory approach in healthcare. Using the Industrial Organization (IO) framework as the theoretical lens, we posit that a hospital’s decision to adopt focused operations is a part of its competitive response to regional competition. (Abstract shortened by ProQuest.)

• Publisher: ProQuest Dissertations & Theses
• Subject: Health care management / Management / Operations research
• ISBN: 9780438456181, 0438456181