Service mix, market competition, and cost efficiency: A longitudinal study of U.S. hospitals

Xin Ding, Xiaosong Peng, Gregory R. Heim, Victoria S. Jordan

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

We examine the longitudinal impact of service mix on cost efficiency in U.S. acute care general hospitals. We propose two different dimensions of service mix, with the first dimension capturing internal emphasis on specific service lines (i.e., specialization) and the second dimension reflecting the deviation of a hospital from the average level of specialization for hospitals in the same service area (i.e., differentiation). We hypothesize that as the level of a hospital's specialization increases, hospital cost efficiency should improve at a decreasing rate. We also hypothesize that differentiation helps improve cost efficiency in competitive markets. Lastly, we examine whether acute care general hospitals can use service mix as an operational lever to improve cost efficiency when specialty hospitals are present in the same local markets. We find strong empirical support for the hypothesized relationships.

Original languageEnglish (US)
Pages (from-to)176-198
Number of pages23
JournalJournal of Operations Management
Volume66
Issue number1-2
DOIs
StatePublished - Jan 1 2020

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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