Network Structure and Hospital Financial Performance in New York State: 1991-1995

Abstract

As networks have proliferated, questions have arisen regarding which structure is optimal. To obtain an answer from the hospital perspective, the authors conducted a survey of New York State hospitals to determine how network integration, complexity, and financial risk sharing relate to measures of financial performance during the period of 1991-1995. Of the 64 hospitals indicating a network affiliation by 1995, 67.2 percent listed some network risk-sharing activity. The least integrated networks were associated with the smallest improvements in throughput, and the most complex were associated with the largest negative changes in operating margins. During the first 2 years of network membership, hospitals joining risk-sharing networks experienced operating margin gains averaging 12 percentage points higher than hospitals joining networks without risk sharing; however, this difference dissipated in later years. Networks with higher levels of integration, lower levels of complexity, and which involve some risk-sharing between affiliates are most likely to experience improved hospital financial performance during the network’s initial years.