Examining Strategy Improvements in Hospitals: Linking Trade-Offs to Performance Frontiers

Abstract

The notion of trade-offs has long been recognized by operations management scholars as a necessary constraint to operations strategy. The increasing importance of this concept is reflected in numerous scholarly works, all seeking an understanding on how firms compete with their limited set of resources. A large majority of the past studies have primarily focused on the empirical validation of trade-offs mainly in manufacturing, with few that have visualized trade-offs as a result of performance frontiers in service sectors. In this article, using longitudinal data, we test and validate trade-offs in a public healthcare service-based setting through a performance frontier lens. Our analyses show that better performing hospitals on the basis of quality and cost-efficiency are those that are closer to their performance frontiers and exhibit a cost trade-off. Those that are situated further away demonstrate a trend for quality and cost improvements. However, despite the positions on the frontier, quality always seemed to be the prerequisite dimension for all hospitals. We believe this reaffirms the logic surrounding the sand cone model, albeit in old industry not known for quality.