Effects of contract management on hospital performance.

The performance of contract-managed (CM) hospitals is compared to that of a set of internally managed hospitals matched on a variety of hospital and market area characteristics. The performance of the study hospitals was similar to that of the matches in the years before the onset of contract management. Among 12 performance indicators, only occupancy rates differed significantly in the two samples in the years before contract management. Occupancy rates were lower on average in the hospitals which later became contract managed. During the 3 years following the onset of contract management, the CM hospitals showed no improvement in productive efficiency but did show changes in the way services were priced. The ratio of gross patient revenue to total expense increased significantly in the CM hospitals relative to their matches. This increase also appears to be associated with an increase in net profits in the CM hospitals relative to their matches.