An examination of the relationship between strategic group membership and hospital performance

The Moderating Effect of the Social Deprivation Index (SDI) on the Relationship Between Hospital Strategy and Financial Performance

Background: One of the major tenets of contingency theory is that the appropriate fit between strategy and environmental contingencies results in better financial performance. The purpose of this study was to investigate whether the Social Deprivation Index (SDI) moderates the association between hospital strategy and financial performance. Methods: We used longitudinal data from 2011 to 2016 from US urban general acute care hospitals. Four secondary datasets were used: the American Hospital Association (AHA) Annual Survey, Medicare cost reports (CMS), Area Health Resource File (AHRF), and the Robert Graham Center's SDI. A generalized estimating equation (GEE) regression model was used to analyze the data. An interaction term was used to test the moderating effect of the SDI on the strategy-financial performance relationship. Results and Discussion: Our results showed that compared to hybrids, the SDI moderates the relationship between strategy and financial performance for cost leaders and hybrids. Increasing market social deprivation increases the hospital operating margin of cost leaders by 0.06%. Similarly, increasing levels of market social deprivation increases the hospital operating margin of hybrids by 0.06% (p < 0.05). As such, our results suggest that social deprivation may affect the viability of hospital strategy.

Strategic management in local hospital markets: service duplication or service differentiation

Background

The purpose of this study is to assess the influences of market structure on hospitals’ strategic decision to duplicate or differentiate services and to assess the relationship of duplication and differentiation to hospital performance. This study is different from previous research because it examines how a hospital decides which services to be duplicated or differentiated in a dyadic relationship embedded in a complex competitive network.

Methods

We use Linear Structural Equations (LISREL) to simultaneously estimate the relationships among market structure, duplicated and differentiated services, and performance. All non-federal, general acute hospitals in urban counties in the United States with more than one hospital are included in the sample (n = 1726). Forty-two high-tech services are selected for the study. Data are compiled from the American Hospital Association Annual Survey of Hospitals, Area Resource File, and CMS cost report files. State data from HealthLeaders-InterStudy for 2015 are also used.

Results

The findings provide support that hospitals duplicate and differentiate services relative to rivals in a local market. Size asymmetry between hospitals is related to both service duplication (negatively) and service differentiation (positively). With greater size asymmetry, a hospital utilizes its valuable resources for its own advantage to thwart competition from rivals by differentiating more high-tech services and reducing service duplication. Geographic distance is positively related to service duplication, with duplication increasing as distance between hospitals increases. Market competition is associated with lower service duplication. Both service differentiation and service duplication are associated with lower market share, higher costs, and lower profits.

Conclusions

The findings underscore the role of market structure as a check and balance on the provision of high-tech services. Hospital management should consider cutting back some services that are oversupplied and/or unprofitable and analyze the supply and demand in the market to avoid overdoing both service duplication and service differentiation.

Strategic Differentiation of High-Tech Services in Local Hospital Markets

This study assesses organizational and market factors related to high-tech service differentiation in local hospital markets. The sample includes 1704 nonfederal, general acute hospitals in urban counties in the United States. We relate organizational and market factors in 2011 to service differentiation in 2013, using ordinary least squares regression. Data are compiled from the American Hospital Association Annual Survey of Hospitals, Area Resource File, and Centers for Medicare and Medicaid Services. Results show that hospitals differentiate more services relative to market rivals if they are larger than the rival and if the hospitals are further apart geographically. Hospitals differentiate more services if they are large, teaching, and nonprofit or public and if they face more market competition. Hospitals differentiate fewer services from rivals if they belong to multihospital systems. The findings underscore the pressures that urban hospitals face to offer high-tech services despite the potential of high-tech services to drive hospital costs upward.

Coopetition in health care: A multi-level analysis of its individual and organizational determinants

Cooperative inter-organizational relations are salient to healthcare delivery. However, they do not match with the pro-competitive healthcare reforms implemented in several countries. Healthcare organizations thus need to balance competition and cooperation in a situation of 'coopetition'. In this paper we study the individual and organizational determinants of coopetition versus those of cooperation in the price-competitive specialized care sector of the Netherlands. We use shared medical specialists as a proxy of collaboration between healthcare organizations. Based on a sample of 15,431 medical specialists and 371 specialized care organizations from March 2016, one logistic multi-level model is used to predict medical specialists' likelihood to be shared and another to predict their likelihood to be shared to a competitor. We find that different organizations share different specialists to competitors and non-competitors. Cooperation and coopetition are hence distinct organizational strategies in health care. Cooperation manifests through spin-off formation. Coopetition occurs most among organizations in the price-competitive market segment but in alternative geographical markets. Hence, coopetition in health care does not appear to be particularly anti-competitive. However, healthcare organizations seem reluctant to share their most specialized human resources, limiting the knowledge-sharing effects of this type of relation. Therefore, it remains unclear whether coopetition in health care is beneficial to patients.

Gamm L, E. Johnson C. Healthcare strategic management and the resource based view

Purpose

– The purpose of this paper is to examine how two large health systems formulate and implement strategy with a specific focus on differences and similarities in the nature of strategic initiatives across systems. The aim is to gain a better understanding of the role of resource dependency theory (RDT) and resource based view (RBV) in healthcare strategic management.

Design/methodology/approach

– A comparative case study design is used to describe, categorize and compare strategic change initiatives within a children's health and a multi-hospital system located in two competitive metropolitan markets. A total of 61 in-person semi-structured interviews with healthcare administrators were conducted during 2009. Summary statistics and qualitative content analysis were employed to examine strategic initiatives.

Findings

– The two health systems have as their top initiatives very similar pursuits, thus indicating that both utilize an externally oriented RDT method of strategy formulation. The relevance of the RBV becomes apparent during resource deployment for strategy implementation. The process of healthcare strategic decision-making incorporates RDT and RBV as separate and compatible activities that are sequential.

Research limitations/implications

– Results from this comparative case study are based on only two health systems. Further, the RBV perspective only takes managerial resources and time into consideration.

Practical implications

– Given that external resources are likely to become more constrained, it is important that hospitals leverage relevant internal resources, in the identification of competitive advantages and effective execution of strategic initiatives.

Originality/value

– The author propose a refined healthcare strategic management framework that takes both RDT and RBV into consideration by systematically linking strategy formulation with deployment of resources.

The association of strategic group and organizational culture with hospital performance in China

BACKGROUND

The policy environment in China is rapidly changing. Strategic planning may enable hospitals to respond more effectively to changes in their external environment, little evidence exists on the extent to which public hospitals in China adopt different strategies and the relationship between strategic decision-making and hospital performance.

PURPOSES

The purposes of our study were to determine the extent to which different hospitals adopt different strategies, whether strategies are associated with organizational culture and whether hospital strategies are associated with hospital performance.

METHODOLOGY

Presidents (or vice presidents), employees, and patients from 87 public hospitals were surveyed during 2009. Measures of strategic group were developed using cluster analysis based on the three dimensions of product position, competitive posture, and market position. Culture was measured using a tool developed by the investigators. Performance was measured based on profitability, patient satisfaction, and employee satisfaction with overall hospital development in the recent 5 years. The association of strategic group and organizational culture with hospital performance was analyzed using multivariate models.

FINDINGS

Chinese public general hospitals were classified into five strategic groups that had significant differences in product positioning, competitive posture, and market position. Hospitals of similar types based on regulation adopted different strategies. Organizational culture was not strongly associated with hospital strategic group. Although strategic group was associated with hospital profitability and patient satisfaction in the models with or without control for hospital location, these effects did not persist after controlling for organizational culture, hospital level, and hospital location.

PRACTICE IMPLICATIONS

It is important for public hospitals in China to make effective strategic planning and align their organizational culture with the strategies for better execution and therefore better performance. Moreover, the method of hospital strategic grouping in the study provides a new way to analyze management issues within a strategic group and between strategic groups.

A configurational view of executive selection behaviours: a taxonomy of USA acute care hospitals

Health-care organizations, particularly hospitals, are among the most complex organizations to manage. However, the executive selection processes these organizations have in place are poorly understood. The purpose of this study is to explore the executive selection processes employed by USA acute care hospitals and discern if such processes are related to environmental, structural and strategic organizational characteristics. We conceptualize this model using a configurational approach. We present an empirically derived taxonomy of hospitals based on executive selection processes, structural and environmental characteristics, and organizational strategy based on the Porter framework. Based on the analyses, three types of hospitals are identified: (1) small, rural, cost leaders with limited selection processes; (2) large, urban, differentiators, with a plan; and (3) small, rural, caught in the middle muddlers.

The impact of health system membership on patient safety initiatives

BACKGROUND

Research in configurations and strategic groups has a rich history of revealing performance differences for hospitals and health care systems.

PURPOSES

To assess the relationship between hospital-led health system configurations and the adoption of patient safety practices. In particular, the adoption of computerized physician order entry (CPOE) and intensive care unit physician staffing (IPS) is analyzed.

METHODOLOGY

Analysis of variance was used to detect differences in patient safety measures based on health networks and systems' initial configuration clustering, and regression was used to assess group membership, controlling for hospital-level characteristics. The 2002 American Hospital Association survey and the first 3 years of the Leapfrog Group annual survey (2003-2005) are used for the analyses.

RESULTS

There were significant differences in CPOE and IPS adoption and implementation levels based on health systems' configurations. Centralized physician/insurance health systems and moderately centralized health systems were the highest configurations in terms of CPOE adoption. Group membership was not positively related to the use of IPS relative to hospitals that are not classified using the taxonomy. In fact, there is a significant and negative adoption rate for both patient safety measures in facilities classified in the independent hospital systems category.

CONCLUSION

There are systematic differences in the adoption of CPOE and IPS patient safety measures based on health system configurations. The configuration with an insurance company as part of its structure was more likely than other groups to be adopting CPOE. PRACTITIONER IMPLICATIONS: Given the durability of group membership, the Leapfrog Group and other patient safety initiatives could explicitly target configurations most likely to adopt and implement patient safety programs.

Examining the scope of multibusiness health care firms: implications for strategy and financial performance

OBJECTIVE

Use theory and data to examine the scope of corporate strategies for multibusiness health care firms, also known as organized or integrated health care delivery systems.

DATA SOURCES

Data are from the 2000 HIMSS Analytics Annual Survey of integrated health care delivery systems (IHDS), which provides complete information on businesses owned by IHDS.

STUDY DESIGN

Scope defined as the breadth and type of businesses in which a firm chooses to compete is measured across seven separate business areas: (1) health plans, (2) ambulatory, (3) acute, (4) subacute, (5) home health, (6) other related nonpatient care businesses, and (7) external collaborations. Theories on strategy and organizational configurations along with measures of scope and a novel dataset were used to classify 796 firms into five mutually exclusive groups. The bases for classification were two competitive dimensions of scope: (1) breadth of businesses and (2) mix of existing core businesses versus new noncore businesses.

DATA EXTRACTION METHODS

Unit of analysis is the multibusiness health care firm. Sample consists of 796 firms, defined as nonprofit organizations that own two or more direct patient care businesses in two or more separate areas across the health care value chain. Firms were clustered into five mutually exclusive organizational configurations with unique scope characteristics revealing a new taxonomy of corporate strategies.

PRINCIPAL FINDINGS

Analysis of the scope variables revealed five strategic types (along with the number of firms and distinguishing features of each strategy) defined as follows: (1) Core Service Provider (340 firms with the smallest scope providing core set of patient care services), (2) Mission Based (52 firms with the next smallest scope offering core set of services to underserved populations), (3) Contractor (266 firms with medium scope and contracting with physician groups), (4) Health Plan Focus (83 firms with large scope and providing health plans), and (5) Entrepreneur (55 firms with the largest scope offering both a core set of services and investing in a variety of new noncore business opportunities including many for-profit ventures). Significant differences in financial performance among the strategies were found when controlling for payer reimbursement conditions. Specifically, in an unfavorable condition with high Medicaid and low commercial insurance, the Mission Based strategy performs significantly worse while the Entrepreneur strategy performs surprisingly well, in comparison with the other strategies.

CONCLUSIONS

Findings suggest: (a) scope can be used to classify a large number of multibusiness health care firms into a taxonomy representing a small group of distinct corporate strategies, which are recognizable by senior management in the health care industry, (b) no single strategy dominates in performance across different payer profiles, instead there appears to be complementarities or fit between strategy and payer profiles that determines which firms perform well and which do not under different conditions, and (c) senior management of nonprofit health care firms are cross-subsidizing unprofitable patient care through ownership of nonpatient care businesses including for-profit ventures.

Information Technologies in Florida's Rural Hospitals: Does System Affiliation Matter?

CONTEXT

The recent explosive growth of information technology in hospitals promises to improve hospital and patient outcomes. Financial barriers may cause rural hospitals to lag in adoption of information technology, however, formal studies that examine rural hospital adoption of information technology are lacking.

PURPOSE

To determine the extent to which rural Florida hospitals utilize clinical and other information technology applications, to identify related information technology issues and barriers, and to explore differences between stand-alone and system-affiliated hospitals.

METHODS

Chief information officers in rural Florida hospitals were surveyed from June 2003-October 2003. A comprehensive set of questions assessed hospital demographics, information technology priorities and barriers, clinical and other information technology systems, and staffing needs.

FINDINGS

In rural Florida, current information technology priorities included upgrading security on information technology systems to meet Health Insurance Portability and Accountability Act requirements (53.6%), implementing technology to reduce medical errors and to promote patient safety (50.0%), and implementing wireless systems (46.4%). With respect to current information technology adoption, system-affiliated rural hospitals were statistically more likely than their stand-alone counterparts to have laboratory information systems (93% vs 39%), pharmacy (87% vs 46%), pharmacy dispensing (53% vs 8%), chart deficiency (60% vs 15%), and order communication results (60% vs 23%). Financial barriers to successful information technology implementation were noted by 69% of stand-alone and 20% of system-affiliated rural hospitals.

CONCLUSIONS

Although top information technology priorities are similar for all rural hospitals examined, differences exist between system-affiliated and stand-alone hospitals in adoption of specific information technology applications and with barriers to information technology adoption.

An empirical investigation of for-profit and tax-exempt nonprofit hospitals engaged in joint ventures

Joint ventures between nonprofit and for-profit hospitals offer opportunities for collaboration to increase efficiency. These transactions have attracted the attention of the Internal Revenue Service, which may threaten tax-exempt status. This article analyzes inherent financial characteristics of nonprofit hospitals that joint venture with for-profit hospitals and those that choose not to joint venture.

Strategic Group Stability

To better understand strategic group stability and the associated mobility barriers concept, we surveyed health care administrators on their reasons for remaining in their current strategic group. We offer administrators' responses to the strategic group stability (mobility barrier) question. Decision-makers may be unaware of these cognitive biases (e.g., group-level world-view and resource similarity) and may not recognize the extent to which they are reducing their strategic alternatives.