Effects of affiliation network membership on hospital quality and financial performance

To examine the effects of hospital membership in affiliation networks-franchise-like networks sponsored by high-quality health systems in which affiliate hospitals pay an annual fee for access to sponsor's operational and clinical resources-on clinical quality, patient experience ratings, and financial performance of affiliates and their competitors.

Network membership data from press releases and websites of four sponsors (Mayo Clinic, Cleveland Clinic, MD Anderson, Memorial Sloan Kettering), American Hospital Association's Annual Survey, Centers for Medicare & Medicaid Services' Hospital Compare, and Healthcare Cost Report Information System, all for 2005-2016.

We used a quasi-experimental design and estimated hospital-level regressions with hospital-fixed effects. Dependent variables were measures of clinical quality, patient experience, and financial performance. Independent variables included an indicator for affiliate versus nonaffiliate and fixed effects for hospital characteristics and year. To analyze effects on competitors, we repeated analyses by comparing hospitals in the same county as an affiliate to nonaffiliated, noncompetitor hospitals.

Membership was obtained through press releases and network websites then linked across datasets by name and Medicare's identification number.

Across networks, affiliates (N = 199) experienced insignificant clinical quality changes but increased net income by $38,500 and operating margin by 6.6% (p values = 0.01-0.08) compared to nonaffiliates. Multispecialty affiliates improved on no measures. Cancer-specific affiliates improved their net income ($96,900) and operating margin (3.6%; p-values < 0.05). Affiliates' competitors experienced mixed changes in clinical measures relative to hospitals without affiliates in market (p-value < 0.05) but no financial effects. Affiliation was not associated with patient experience ratings for affiliates nor competitors.

Despite quality-focused missions, affiliation networks are not guaranteed to improve public measures of quality in affiliated hospitals, although hospitals in these communities improve financially. Future research should assess the conditions and mechanisms by which affiliation improves quality consistently and which forms of quality.