The effect of experience, ownership and focus on productive efficiency: A longitudinal study of U.S. hospitals

Focusing on organizational learning research in healthcare settings, this paper studies how experience, ownership and focus affect productive efficiency in U.S. hospitals. Building on organizational learning theory, health economics and the focused factory concept, we propose that hospitals learn to improve productive efficiency and the relationship between productive efficiency and cumulative experience is curvilinear. We also hypothesize that clinical focus has a positive effect on productive efficiency and that nonprofit hospitals and proprietary hospitals trade off costs and quality differently. The proposed hypotheses are tested with yearly performance data for over 3700 major U.S. hospitals spanning from 1996 to 2010. We find strong support for the proposed hypotheses.