Process-based organization design and hospital efficiency

BACKGROUND: The central idea of process-based organization design is that organizing a firm around core business processes leads to cost reductions and quality improvements. PURPOSES: We investigated theoretically and empirically whether the implementation of a process-based organization design is advisable in hospitals. METHODOLOGY: The data came from a database compiled by the Statistical Office of the German federal state of Rheinland-Pfalz and from a written questionnaire, which was sent to the chief executive officers (CEOs) of all 92 hospitals in this federal state. We used data envelopment analysis (DEA) to measure hospital efficiency, and factor analysis and regression analysis to test our hypothesis. FINDINGS: Our principal finding is that a high degree of process-based organization has a moderate but significant positive effect on the efficiency of hospitals. PRACTICE IMPLICATIONS: The main implication is that hospitals should implement a process-based organization to improve their efficiency. However, to actually achieve positive effects on efficiency, it is of paramount importance to observe some implementation rules, in particular to mobilize physician participation and to create an adequate organizational culture.