Abstract
The rising cost of healthcare in the United States has had a major impact on the operation of general hospitals. The limitation of a fee for service has forced them to scale back operations in an attempt to become efficient. Over the last 15 years, general hospitals have faced a new competition from for-profit specialty hospitals that operate on a focused factory model and are threatening to siphon-off the most profitable patients. This paper will discuss the presence of specialty hospitals in North America and Europe and review the impact of governmental intervention and investigation of them. Finally, it attempts to compare the efficiency of general hospitals and specialty hospitals in the United States using stochastic frontier regression analysis. Although the data set used here is simulated, based on realistic assumptions from the available data, the results suggest that specialty hospitals would be more efficient than general hospitals. The analysis and findings will enable healthcare managers to steer their institutions in a new direction in a time of change within the industry.