An Analysis of the Effects of Intra- and Interorganizational Arrangements on Hospital Supply Chain Efficiency

Efficiency in supply chain operations is increasingly a key strategic goal as organizations focus on containing cost. This is especially the case for hospitals where supply chain costs account for a substantial portion of operating budgets. In this study, we examine the impact of incentive mechanisms for internal stakeholders and negotiating leverage with external partners on supply chain efficiency in the hospital industry. We premise the study on agency, stewardship, and power theories. We use data from over 200 California hospitals in a five-year period (pooled data) to estimate regression models using generalized estimating equation. We find that physician employment and contract management enhance supply chain efficiency. Surprisingly, we did not find that better supply chain efficiency was associated with either hospital affiliation with systems or high-volume purchases through large national group purchasing organizations. The results have important theoretical and managerial implications for supply chain management.