Cooperation for a competitive position: The impact of hospital cooperation behavior on organizational performance

Several public policy initiatives, particularly those involving managed care, aim to enhance cooperation between partners in the health care sector because it is expected that such cooperation will reduce costs and generate additional revenue. However, empirical evidence regarding the effects of cooperation on hospital performance is scarce, particularly with respect to creating a comprehensive measure of cooperation behavior.

The aim of this study is to investigate the impact of hospital cooperation behavior on organizational performance. We differentiate between horizontal and vertical cooperation using two alternative measures-cooperation depth and cooperation breadth-and include the interaction effects between both cooperation directions.

Data are derived from a survey of German hospitals and combined with objective performance information from annual financial statements. Generalized linear regression models are used.

The study findings provide insight into the nature of hospitals' cooperation behavior. In particular, we show that there are negative synergies between horizontal administrative cooperation behavior and vertical cooperation behavior. Whereas the depth and breadth of horizontal administrative cooperation positively affect financial performance (when there is no vertical cooperation), vertical cooperation positively affects financial performance (when there is no horizontal administrative cooperation) only when cooperation is broad (rather than deep).

Horizontal cooperation is generally more effective than vertical cooperation at improving financial performance. Hospital managers should consider the negative interaction effect when making decisions about whether to recommend a cooperative relationship in a horizontal or vertical direction. In addition, managers should be aware of the limited financial benefit of cooperation behavior.