Hospital management contracts: institutional and community perspectives

Previous studies have shown that external management by contract can improve the performance of managed hospitals. This article presents a conceptual framework which develops specific hypotheses concerning improved hospital operating efficiency, increased ability to meet hospital objectives, and increased ability to meet community objectives. Next, changes in the process and structure of management under contractual arrangements, based on observations from two not-for-profit hospital systems, are described. Finally, the effects of these management changes over time on hospital and community objectives are presented. These effects suggest progressive stages in the development of management contracts. The first stage focuses on stabilizing hospital financial performance. Stage two involves recruitment and retention efforts to secure necessary personnel. In the third stage, attention shifts to strategic planning and marketing.