Performance of major teaching hospitals during the 1990s: adapting to turbulent times

A panel design was used to analyze changes in performance variables related to profitability, volume, and efficiency in a national sample of major teaching hospitals from 1990 to 1999. After steady increases beginning in 1990, the average total margin ratio peaked in 1996 and by 1999 it declined by almost 50 percent. Average operating margins were negative every year. Major teaching hospitals responded to financial pressures by expanding outpatient activity, reducing length of stay, downsizing inpatient capacity, and increasing labor productivity. Membership in multi-hospital systems increased by over 70 percent through the 1990s. Increases in average real cost per adjusted admission peaked in 1994 and fell by 6 percent from 1994 to 1999.