Abstract
During the past two decades, the hospital industry has witnessed growth in the prevalence of single-specialty hospitals focused on areas such as cardiac care, orthopedics, or women's health. The growth of these single-specialty facilities-commonly referred to as "focused factories"-has engendered debate regarding their impact on medical productivity (i.e., the quality-adjusted cost of medical care).
Proponents of these facilities note that their focus on specific diseases leads to the development of expertise and improved performance with respect to both the cost and quality of care. Critics suggest that any apparent gains in productivity created by these facilities are due to their ability to select patients who are profitable to treat. They add that this selection may leave competing general hospitals with a less-profitable mix of patients, thereby jeopardizing the ability of general hospitals to provide less-remunerative (though socially beneficial) services such as trauma care and inpatient psychiatry.
Against this background, we consider the impact of specialty hospitals on medical productivity at two levels. First, we consider whether specialty hospitals improve the productivity of the care delivered to their targeted population (e.g., cardiac or orthopedic patients). Second, we consider the impact that specialty hospitals have on the overall mix of services offered by competing general hospitals. We discuss the implications of this latter analysis for the overall productivity of medical care.