Strategic adaptations to PPS by rural hospitals: implications for theory and research

Financial Consequences of Rural Hospital Long-Term Care Strategies

Data for 540 rural hospitals from 1982 to 1997 were analyzed to determine whether adoption of long-term-care (LTC) strategies improved hospital financial performance. Adoption of external and internal LTC strategies (other than swing-beds) was generally, but not unambiguously, associated with higher profits, increased occupancy, and/or lower costs.

The strategic behavior of U.S. rural hospitals: a longitudinal and path model examination

This article explores the relationships among rural hospital strategic behavior (market power and cost control strategies), environmental and organizational characteristics, and the influence these have on the financial performance of rural hospitals in the United States. The study finds that only market power strategies and organizational characteristics (ownership and size) exhibit significant impacts on rural hospital financial performance.

Consequences of organizational change in U.S. hospitals

Organizational change has become commonplace among U.S. hospitals. Empirical investigations of the consequences of organizational change, however, are relatively scarce, and findings of existing studies are inconsistent. In this article, the authors review the rationale and performance implications of hospital organizational change in three areas: (1) the development of new multi-institutional arrangements, (2) change in traditional ownership and management configurations, and (3) diversification in organizational products/services and consolidation of organizational scale. Empirical research on hospital change published between 1980 and 1999 in the health services research, social science, and business literatures is reviewed to highlight the potential pitfalls that hospitals may encounter in their effort to remain viable. The article also summarizes the strengths and weaknesses of current hospital change research and provides specific suggestions for future research in this area.

Physician and clinical integration among rural hospitals

The pressures for closer alignment between physicians and hospitals in both rural and urban areas are increasing. This study empirically specifies independent dimensions of physician and clinical integration and compares the extent to which such activities are practiced between rural and urban hospitals and among rural hospitals in different organizational and market contexts. Results suggest that both rural and urban hospitals practice physician integration, although each emphasizes different types of strategies. Second, urban hospitals engage in clinical integration with greater frequency than their rural counterparts. Finally, physician integration approaches in rural hospitals are more common among larger rural hospitals, those proximate to urban facilities, those with system affiliations, and those not under public control.

A comparison of financial performance, organizational characteristics and management strategy among rural and urban nursing facilities

Despite efforts to deinstitutionalize long-term care, it is estimated that 43 percent of the elderly will use a nursing facility at some point. Whether sufficient nursing facility services will be available to rural elderly is debatable due to cutbacks in governmental expenditures and recent financial losses among nursing facilities. This paper explores the challenges confronting rural nursing facilities in maintaining their viability and strategies that might be considered to improve their longevity. A comparative analysis of 18 urban and 34 rural nursing facilities in New Mexico is used in identifying promising strategic adaptations available to rural facilities. Among other considerations, rural facilities should strive to enhance revenue streams, implement strict cost control measures, emphasize broader promotional tactics, and diversify services commensurate with the constraints of the communities and populations served.

Multihospital system affiliation as a survival strategy for rural hospitals under the prospective payment system

The introduction of Medicare's Prospective Payment System (PPS) has disproportionately increased financial pressures on rural hospitals and posed challenges to the survival of these institutions. Increasingly, rural hospitals are seeking strategies that can enhance their chances for survival in a turbulent and hostile environment. This study examined the survival effects of one such strategy, multihospital system affiliation. Specifically, we assessed: (1) whether and how different types of system affiliation in the post-PPS era affect the likelihood of rural hospital survival; (2) whether particular structural, environmental and hospital performance characteristics moderate the effects of system affiliation on rural hospital survival; and (3) whether systematic selection by rural hospitals into multihospital systems potentially accounts for observed relationships between system affiliation and survival. Proportional hazards analyses indicate that system affiliation with investor-owned systems significantly reduces survival probabilities of rural hospitals. Affiliation with not-for-profit systems or system affiliation under contract management arrangements does not affect survival probabilities of rural hospitals. These general findings are moderated by the effects of hospital ownership and size at the time of affiliation. Finally, study findings indicated that systematic selection by poor performing rural hospitals into investor-owned systems has occurred in the post-PPS era. No evidence of selection into not-for-profit systems was discovered.

Determinants of physician vacancy rates in rural hospitals

This study examines the determinants of physician vacancy rates in rural hospitals from the perspective of the rural hospital administrator. Data on community characteristics, hospital characteristics, and hospital recruitment strategies are examined for 50 rural hospitals in Kentucky using questionnaire and archival data. Physician vacancy rates in this sample were quite high (mean of 37 percent). Results indicate lower physician vacancy rates in hospitals with a chain affiliation. In addition, the "job shopping" model for physicians decisions on where to practice (Johnson, 1978) is supported. Hospitals that target physician candidates with more work experience display lower physician vacancy rates. Generally, hospital characteristics were more significant predictors of physician vacancy rates than were community characteristics. Implications for rural hospital physician recruitment/retention strategies are discussed.

Horizontal and vertical integration-diversification in rural hospitals: a national study of strategic activity, 1983-1988

This study examines both the magnitude of and factors influencing the adoption of 13 horizontal and vertical integration and diversification strategies in a national sample of 797 U.S. rural hospitals during the period 1983-1988. Using organization theory, hypotheses were posed relating environmental and market factors, geographic location, and hospital characteristics to the adoption of horizontal and vertical integration and diversification. Results indicate that only one of 13 strategies was adopted by more than 50 percent of all rural hospitals during the study period, and that most of the directional hypotheses were not confirmed using Cox's proportional hazards models. In particular, environmental and market factors were unrelated to the strategies studied. Issues of methodology and theory are discussed; however, during an historically turbulent period, both relatively low levels of rural hospital strategic activities and lack of predictive power of the theory suggest caution in relying heavily on a policy for rural hospital survival that is dependent on individual market-oriented strategic behavior.

Does planning pay off? A look at the experience of New Mexico's rural hospitals

When Medicare's prospective payment system (PPS) was implemented, hospitals faced the prospect of diminishing reimbursement. Added to other fundamental changes involving medical practice, consumerism, competition, and medical technology, hospitals had significant incentives to focus more attention on strategic planning. This article examines how rural hospitals altered their strategic planning in response to PPS and the extent to which planning is related to better performance. It presents results from a case study of rural New Mexico hospitals. The implications of these results for other hospitals are discussed by the authors.

Strategic adaptation of US rural hospitals during an era of limited financial resources: a longitudinal study, 1983 to 1993

This research investigated the competing effects of environmental and organizational pressures on rural hospitals' revenue-enhancing and cost-containment strategies from 1993 to 1993. In general, organizational pressures (multihospital system membership and non-government control) exerted more influence than environmental ones. Also, strategies generally were sustained over time and were particularly interdependent with hospitals' maintenance of staffed beds. Strategies did respond to environmental pressures, however, with revenue enhancement associated with local market competition and munificence, and cost containment associated with pressures from Medicare reimbursement.

Assessing hospital administrators' responses to prospective payment. A case study in New Mexico

Few studies have assessed the relationship between hospital administrators' efforts at planning and subsequent performance of health care organizations. Nonetheless, planning is viewed as an important mechanism for aligning health services delivery efforts with community needs and operating constraints. When prospective payment (PPS) was first introduced, hospital administrators had little choice other than to plan how they would respond to the new reimbursement policies. However, it is unclear whether they actively undertook planning in an effort to address prospective payment and related pressures. This article presents a case study of rural New Mexico hospital administrators' efforts to respond to prospective payment. Two dimensions of planning effort by administrators--intensity and formality--are analyzed within rural hospitals during the PPS transition (i.e., 1983 to 1987) and after its full implementation (i.e., since 1988). The findings suggest that planning intensity during the PPS transition is associated with higher performance; notably, higher net patient care revenues, lower costs per patient day, higher operating margins, higher net income, and higher planning effectiveness. However, the strength of these associations weakened as PPS was fully implemented. Given the exploratory nature of this evaluative case study, the results should be viewed as preliminary until confirmed by larger studies. The implications for research that evaluates planning-performance relationships in the health care field are discussed.

America's rural hospitals: a selective review of 1980s research

We review 1980s research on American rural hospitals within the context of a decade of increasing restrictiveness in the reimbursement and operating environments. Areas addressed include rural hospital definitions, organizational and financial performance, and strategic management activities. The latter category consists of hospital closure, diversification and vertical integration, swing-bed conversion, sole community provider designation, horizontal integration and multihospital system affiliation, marketing, and patient retention. The review suggests several research needs, including: developing more meaningful definitions of rural hospitals, engaging in methodologically sound work on the effects of innovative programs and strategic management activities--including conversion of the facility itself--on rural hospital performance, and completing studies of the effects of rural hospital closure or conversion on the health of the communities served.