Acquisition strategies of multihospital systems

Correlates of interorganizational relationship strategies among critical access hospitals

BACKGROUND

Interorganizational relationships (IORs) between hospitals and other health care providers have many potential benefits for critical access hospitals (CAHs) that operate in resource-constrained environments. Given the potential benefits of IORs, especially for CAHs, it is important to identify the conditions that support or hinder IOR development. However, most research examining IORs isolates individual types of relationships while ignoring the practical reality that many hospitals participate in a portfolio of relationships simultaneously.

PURPOSE

The aim of the study was to examine the IOR strategies of CAHs as a function of market and organizational characteristics.

METHODOLOGY

The sample consisted of CAHs operating in the United States between the years 2002 and 2012. For each year, hospitals were assigned to one of four mutually exclusive IOR categories: (a) no IOR, (b) vertical IOR only, (c) horizontal IOR only, and (d) both vertical and horizontal IOR. Organizational characteristics were categorized as structural, operational, and financial. Environmental characteristics were categorized as sociodemographic, physical, and health delivery system-related. A multinomial logistic regression model was used to assess the relationship between IOR strategies and organizational and environmental characteristics, with results reported as average marginal effects.

RESULTS

Approximately 41% of the CAHs were pursuing a combined vertical and horizontal IOR strategy, 20% were pursuing a vertical IOR-only strategy, 18% were pursuing a horizontal IOR-only strategy, and 21% were not engaged in an IOR strategy. Among the organizational characteristics, the type of IOR strategy used by a hospital varied as a function of ownership, total margin, days cash on hand, number of community orientation activities, and census. In contrast, among the environmental characteristics, only the number of community health centers in the community was associated with the type of IOR strategy pursued.

CONCLUSION

CAHs' construction of IOR portfolios may be more dependent on organizational attributes than by environmental conditions.

Mergers and acquisitions in Western European health care: exploring the role of financial services organizations

Recent policy developments in Western European health care - for example in the Netherlands - aim to enhance efficiency and curb public expenditures by strengthening the role of private sector. Mergers and acquisitions (M&As) play an important role in this respect. This article presents an analysis of 1606 acquisition deals targeting health care provider organizations in Western Europe between 1990 and 2009. We particularly investigate the role of financial services organisations as acquirers. Our analysis highlights (a) a rise of M&As in Western Europe since 2000, (b) an increase of M&As with financial service organisations acting as acquirer in absolute terms, and (c) a dominant role of the latter type of M&As in cross-border deals. To explain these developments, we make a distinction between an integration and a diversification rationale for M&As and we argue that the deals with financial services organisations in the role of acquirer are driven by a diversification rationale. We then provide arguments why health care, from the acquirer's perspective, can be considered as an interesting target in a diversification strategy and we advance reasons why health care providers may welcome this development. Although caution in drawing conclusions is needed, our findings suggest a penetration of private capital into health care provision that may be interpreted as a specific form of privatisation. Furthermore, they point to a rising internationalisation of health care. Both findings may entail far-reaching implications for health care, as they may induce both cultural privatisation and cultural internationalisation.

The technical efficiency of hospitals under a single payer system: the case of Ontario community hospitals

Using DEA, we investigated the impact of ownership, size, and location on the relative technical efficiency of community hospitals in Ontario, which has a single payer system. Consistent with Hansmann's theory of non-profit organizations and contrary to US-based research, we find no significant differences in efficiency across ownership types (government, religious or secular non-profit). Nor do we find significant differences in efficiency by size or location. Our findings suggest that model formulation and differences in payer mix across types of hospitals in the US have a strong influence on the measurement of the hospital ownership-efficiency relationship.

Ownership type and community benefits of women's health centers

An important aspect of the changing health care system is the growth of women's health centers--organizations that design and deliver services to women. This growth has generated interest in the behavior of centers, especially because of increasing awareness of women's health issues. Using data from the 1994 National Survey of Women's Health Centers, the authors examined the association between ownership of centers and 12 measures of community benefits, and 296 nonprofit and 108 for-profit centers were compared. Overall, the nonprofits performed better than the for-profits in terms of serving underserved women, delivering comprehensive primary care services, providing training for health professionals and education services for clients and the community, and involving the community in center governance. Among women's health centers, the results show that ownership matters, and indicate the importance of supporting providers who serve the underserved and developing a standard of community benefits.

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.

Conversion of HMOs and hospitals: what's at stake?

Because for-profit conversions of nonprofit organizations are regulated under trust law at the state level, their health policy implications have generally not been part of the process. This paper provides a health policy framework for assessing conversions of hospitals and health maintenance organizations (HMOs). It begins with basic differences in ownership forms and identifies considerations on both sides of the conversion question. The analysis turns on the extent of the social benefits of nonprofits: the regulatory tool provided by tax exemptions, trustworthiness in the presence of informational asymmetries, and community benefit activities. The analysis and the evidence suggest that the nonprofit form continues to hold significant advantages in health care that bear consideration by policymakers faced with conversion proposals.

The "corporatization" of U.S. hospitals: what can we learn from the nineteenth century industrial experience?

While broad parallels have been noted between the current "corporatization" of health care and developments in U.S. manufacturing in the late 19th century, there has been little in-depth analysis of these parallels. This article explores trends in the industrial organization of the hospital industry from the perspective of the manufacturing experience. Efforts to use corporate managerial techniques to rationalize hospitals have played an important role in the development of the modern structure of the hospital industry since the 1920s. But the emergence of multihospital systems is a new phenomenon. Some significant similarities exist between current conditions in the hospital industry and conditions in manufacturing at the time of the great industrial merger boom at the turn of the century. The subsequent experience of multiplant manufacturing firms created during the great industrial merger boom varied considerably. The characteristics of successful industrial consolidations are not present in the hospital industry; but motives for consolidation exist that were not present in manufacturing, while changes in the organization of production loom in the future.