The decision to vertically integrate services and deliver care has both management and policy concerns for healthcare in the United States. The change in reimbursement, which was enacted with the Balanced Budget Act of 1997, influenced the availability of post acute services for acute hospital inpatients. Prior to this change, post acute services were reimbursed based on cost similar to the pre DRG era of Medicare reimbursement. The change in payment had the potential to make discharging patients more difficult resulting in a prolonged length of stay without additional payment and at increased costs for hospitals. As a result of this change hospitals made arrangements to provide care for this population. The choices included vertical integration, contracting or hybrid arrangement and simply relying on the spot market. This makes or buy decision is a focus of this study. Were hospital decisions different after the BBA, than before this legislation?This study utilizes Oliver Williamson's transaction cost economics theory as the framework for the study and is a replication of a prior study by Chiu (1995) hybrid arrangement and simply relying on the spot market. This makes or buy decision is a focus of this study. Were hospital decisions different after the BBA, than before this legislation?This study utilizes Oliver Williamson's transaction cost economics theory as the framework for the study and is a replication of a prior study by Chiu (1995) The Williamsons theory is based on the proposition that three transaction dimensions determine the most efficient method of operation for a firm: uncertainty, frequency, and asset specificity. Depending on the "market", organizations may elect to arrange services through the spot market, contract for services, or vertically integrate the service. The study uses data from the American Hospital Association survey as well as the Area Resources files to determine if individual hospitals have made contract arrangements, vertically integrated, or relied on the spot market to provide skilled nursing services. Data is collected before and after the BBA and analyzed using multiple regression analysis and then subjected to significance testing. Sixteen hypotheses are tested that focus on the three dimensions of transaction cost theory. Findings support the importance of transaction frequency and asset specificity, while only weak support is offered for transaction uncertainty. The results differ from the Chiu study, which found strong support for uncertainty and weak support for frequency. This study is unique in that it examines data from two time periods surrounding a major reimbursement change in Medicare. It makes an important contribution to the empirical testing of transaction cost economics and the decision to vertically integrate in health care.
| Identifer | oai:union.ndltd.org:vcu.edu/oai:scholarscompass.vcu.edu:etd-2494 |
| Date | 01 January 2006 |
| Creators | Lucente, Betty C. |
| Publisher | VCU Scholars Compass |
| Source Sets | Virginia Commonwealth University |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | Theses and Dissertations |
| Rights | © The Author |
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