Size effect on hospital efficiency has been addressed using different approaches. One approach to
explain size effect is contingency theory (Zinn & Mor, 1998). According to this theory, organizational
outcomes are determined by the fit between its choice of mechanisms for communication, coordination,
and integration of effort across the organization and its operating context. These three elements can be
described in terms of formalization, specialization, standardization, complexity, and centralization.
Formalization is the amount of written documentation in the organization, including procedures, job
descriptions, regulations, and policy manuals. Specialization refers to the degree to which tasks are
subdivided into jobs, while standardization is the extent to which similar work is performed in a uniform
manner. Complexity is the number of discrete units and their arrangement in the organization.
Organizations that array units in a descending hierarchy are vertically complex, while organizations
with many units operating at the same level are horizontally complex. Further, centralization refers to the
hierarchical level with the authority to make decisions. An organization in which all decisions are made
by top management is highly centralized.