Health Care Costs and Financing

Market pressures prompt children's hospitals to develop new relationships with doctors and other health care organizations

Although they constitute less than 1 percent of all hospitals in the United States, children's hospitals provide care for about 12 percent of all hospitalized children and training for about 25 percent of all pediatricians in the United States. The traditional mission of children's hospitals was threatened by marketplace turbulence in the 1990s, including the rise of managed care, consolidation within the adult health care delivery system, and the prospect of government-led national health care system reform in the early 1990s. There was a move toward more outpatient care, and hospital lengths of stay declined.

Over 90 percent of children's hospitals reported increased marketplace competition. Nearly all of them responded by creating new formal business relationships with other providers in their markets. The most common strategy was to form a network of pediatricians through various physician-hospital integration models. Most preferred looser forms of affiliation, for example, an "open" physician-hospital organization or independent practice association that allowed doctors a substantial degree of autonomy.

About 86 percent of children's hospitals developed at least one type of business relationship with pediatricians or with another health care organization. Seventy-two percent developed a network of pediatricians, and 59 percent developed a relationship with an adult-focused health care organization. However, despite these organizational moves, the children's hospitals did not significantly change their child-focused agenda for teaching, research, and community service, even when they allied themselves with adult hospitals or health care organizations.

These findings are from a study supported by the Agency for Healthcare Research and Quality (National Research Service Award training grant T32 HS00063). Donald Goldmann, M.D., of Harvard Medical School, and his colleagues analyzed survey responses from the chief executive officers of 29 U.S. children's hospitals (there are a total of 44) about the impact of market changes on hospital roles and missions from 1991 through 1996.

See "Market forces and organizational evolution at freestanding children's hospitals in the United States," by John D. Yee, M.D., M.P.H., Donna Shelton, M.H.A., Shirley Girouard, Ph.D., R.N., and others, in the March 2001 Ambulatory Pediatrics 1(2), pp. 117-121.

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