Physician-hospital integration and hospital financial performance: A necessity condition analysis of U.S. Acute care hospitals, 2019 to 2022

<title>Abstract</title> <p>Physician-hospital integration (PHI) is often discussed as a strategy for improving hospital performance, yet most prior studies ask whether integration changes outcomes on average. This study addresses a different question by examining whether PHI function as necessary conditions for hospital financial outcomes. Using pooled cross-sectional data from 2019 to 2022, we classify eight American Hospital Association-featured PHI arrangements into financial PHI and collaborative PHI and examine four financial outcomes: net profit margin, operating profit margin, days cash on hand, and the total-salaries-to-total-expense ratio. Our results of the necessary conditional analysis show no necessity effect for financial PHI on net profit margin, operating profit margin, or days cash on hand. Financial PHI shows a statistically detectable but trivial necessity effect for the total-salaries-to-total-expense ratio, with effect size 0.026, while collaborative PHI shows a statistically detectable but trivial necessity effect for net profit margin, with effect size 0.027. Complementary partial least squares structural equation modeling does not identify robust sufficiency-based pathways from PHI type to the latent financial performance construct. In summary, our results did not support the view that PHI is broadly required for hospital financial success. Instead, they suggest that specific integration arrangements may operate as weak boundary conditions for a narrow subset of financial outcomes.</p>