Does restructuring hospitals result in greater efficiency?--An empirical test using diachronic data.

Abstract

Hospitals are being restructured more frequently. Increased cost efficiency is the usual justification given for such changes. All 20 major teaching hospitals in Australia's two most populous states were investigated by classifying each over a 5-6 year period in terms of their cost efficiency (average cost per case weighted by Australian diagnosis-related group [AN-DRG] data and adjusted for inflation) and structure, categorized as traditional-professional (TP), clinical-divisional (CD), or clinical-institute (CI). In all, 12 hospitals changed structure during the study period. There was slight evidence that CD structures were more efficient than TP structures but this was not supported by other evidence. There were no significant differences in efficiency in the first or second years following changes from either TP to CD or TP to CI structures. All four hospitals changing from CD to CI structure became significantly less efficient. This may be due to frequency rather than type of change as they were the only hospitals that implemented two structural changes. Hospitals that changed or did not change structure were similar in efficiency at the beginning and at the end of the study period, in overall efficiency during the period, and in trends toward efficiency over time. The findings challenge those who advocate restructuring hospitals on the grounds of improving cost efficiency.