Hospital Services Centralization : A Case Study on Performance Effects in Denmark

This paper analyzes how hospital service centralization affects performance, assessed by length of stay and readmission rate. The centralization was demanded by a public policy change in Danish healthcare in 2011. We adopt the view of institutional theory and employ a mixed-methods approach in a natural experiment, in which some hospital services are centralized. Our data include 24,694 observations of patient treatments from 2010-2012, public documentation on the public policy change, information from the data management system of the hospital, as well as interviews with key informants. Our econometric difference-in-difference analysis finds that the length of stay increases by 0.38 days and the readmission rate decreases by approximately 4 percentage points after a service centralization. The qualitative analyses of interviews and internal accounting data illustrate how the hospital struggles for legitimacy after the policy change, and how cost savings obstruct the centralized department in achieving its goals