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Joining a hospital network may improve the fiscal viability of rural hospitals

Dramatic health care system changes have prompted more than 300 rural hospitals to close in the past decade. Joining a hospital network may well improve the fiscal performance and perhaps viability of rural hospitals, concludes a study supported in part by the Agency for Health Care Policy and Research (HS08633). It found that Oklahoma rural hospitals that belonged to hospital networks tended to have lower net operating, labor, and other costs, lower costs for supplies, and fewer personnel than hospitals not in a network.

Participation in networks enables hospitals to cooperate in activities such as marketing, recruiting staff, purchasing equipment, developing clinics, converting capacity, or sharing staff, which aid their financial viability, explains Robert W. Broyles, Ph.D., of the University of Oklahoma Health Science Center. Dr. Broyles and colleagues in the Oklahoma Rural Research and Demonstration Center analyzed data from two surveys of rural hospitals in the State: the Survey of Rural Hospitals in Networks (SRHIN) and the Hospital Utilization and Planning Survey (HUPS). They examined differences in the fiscal performance between 26 hospitals that were not members of a network and 34 hospitals that participated in networks from 1990 to 1995.

About 61 percent of network hospitals described their fiscal performance as poor or average prior to joining a network, while 39 percent reported their financial performance as good. Half of the hospitals responding to the SRHIN indicated that their network membership improved their fiscal performance. When compared with nonparticipants, network hospitals were able to improve their net cash flow by incurring lower net operating costs rather than by generating higher patient revenues.

More details are in "Networks and the fiscal performance of rural hospitals in Oklahoma: Are they associated?" by Dr. Broyles, Edward N. Brandt, Jr., M.D., Ph.D., and Diane Biard-Holmes, M.S.W., in the Fall 1998 Journal of Rural Health 14(4), pp. 327-337.

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