An Analysis of Organizational Performance Based on Hospital Specialization Level and Strategy Type

Hospitals are studying the focused factory concept and attempting to increase their power in a competitive industry by becoming more specialized.

This study uses the information theory index (ITI) and the Herfindahl-Hirschman index (HHI) to analyze the extent of specialization by Korean hospitals that receive national health insurance reimbursements. Hierarchical regression analysis is used to assess the impact of hospital specialization on the following four aspects of operational performance: productivity, profitability, efficiency and quality of care.

The results show that a focused strategy (high HHI) improves the income and adjusted number of patients per specialist through the efficient utilization of human resources. However, a diversified strategy (high ITI) improves the hospital utilization ratio, income per bed and adjusted number of patients per bed (controlling for material resources such as beds). In addition, as the concentration index increases, case-mix mortality rates and referral rates decrease, indicating that specialization has a positive relationship with quality of care.