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Hospitals that lower both their costs per discharge and patients’ average length of stay tend to control a larger portion of the inpatient market, according to a new study published by the International Journal of Production Economics.

The paper was coauthored by Bogdan C. Bichescu, associate professor of business analytics, and Randy V. Bradley, assistant professor of supply chain management, both with the University of Tennessee, Knoxville’s Haslam College of Business.

For the study, researchers observed 288 short-term acute care hospitals that made improvements between 2004 and 2011 in three specific areas: average length of stay, cost per discharge, and conformance quality. Conformance quality is defined as compliance with health care standards.

The analysis revealed that hospitals that lower costs per discharge and average length of stay achieve greater inpatient market share, while those that make improvements in conformance quality lose market share.

What does this mean for hospitals?

The health care industry is shifting to value-based payment models, in which hospitals face increasing pressure to balance strategic priorities and improve the effectiveness and efficiency of care delivery, researchers explained.

“Over the long term, such decisions can strengthen a hospital’s competitive positioning and improve its ability to navigate legislative changes that increasingly favor value-based principles of health care management,” said Bradley.

However, the findings also indicate an alarming trend: that improving hospitals’ conformance quality tends to be associated with lower market share. “Improving this measure hinders a hospital’s ability to improve its financial position and to achieve its service-oriented mission of caring for more patients in the surrounding communities,” said Bichescu.

The paper, “Benefits and implications of competing on process excellence: Evidence from California hospitals,” was coauthored by researchers from Florida International University’s College of Business in addition to Bichescu and Bradley.

CONTACT:

Megan Boehnke (865-974-4232, mboehnke@utk.edu)

Tanya Brown (865-974-1570, tgbrown@utk.edu)