The Role of Organizational Slack in Buffering Financially Distressed Hospitals from Market Exits.

EXECUTIVE SUMMARY: Financial distress is a persistent problem in U.S. hospitals, leading them to close at an alarming rate over the past two decades. Given the potential adverse effects of hospital closures on healthcare access and public health, interest is growing in understanding more about the financial health of U.S. hospitals. In this study, we set out to explore the extent to which relevant organizational and environmental factors potentially buffer financially distressed hospitals from closure, and even at the brink of closure, enable some to merge with other hospitals. We tested our hypotheses by first examining how factors such as slack resources, environmental munificence, and environmental complexity affect the likelihood of survival versus closing or merging with other organizations. We then tested how the same factors affect the likelihood of merging relative to closing for financially distressed hospitals that undergo one of these two events. We found that different types of slack resources and environmental forces impact different outcomes. In this article, we discuss the implications of our findings for hospital stakeholders.

Examination of nursing home financial distress via Porter's five competitive forces framework.

BACKGROUND: Nursing homes face increased risk of closure because of poor financial performance. PURPOSE: Using resource dependency theory, Porter's Five Forces of Competition framework, and Altman's Z -score model, this study examines the relationship between market factors and nursing home financial distress. METHODOLOGY/APPROACH: This study utilizes Medicare Cost Reports, LTCFocus, Certification and Survey Provider Enhanced Reporting, Online Survey Certification and Reporting, and the Area Health Resource File to examine an average of 10,454 nursing homes per year from 2000 to 2015. Using Porter's framework, market factors were conceptualized as the bargaining power of buyers and suppliers, threat of substitutes and new entrants, and industry rivalry. Organizational control variables include occupancy, payer mix, size, and chain affiliation. Data were analyzed using multinomial logistic regression with robust clustering, year, and state fixed effects. RESULTS: Distressed nursing homes (Relative Risk Ratios [RRR] = 0.991) were less likely to be in counties with higher Medicaid concentration. Distressed (RRR = 0.717) and at-risk-of-distress nursing homes (RRR = 0.807) were less likely to be in markets with home health agencies, and nursing homes at risk of distress (RRR = 1.005) were more likely to be in markets with a higher number of hospital-based skilled nursing facility beds compared to healthy organizations. The organizational-level variables, occupancy, payer mix, size, and chain affiliation had a significant impact on nursing home financial distress. CONCLUSIONS: The effects of external market forces on nursing home financial distress were limited; however, organizational-level variables had a significant impact on nursing home financial distress. PRACTICAL IMPLICATIONS: Study findings can inform policy makers on specific factors associated with nursing home financial distress and provide greater insight as it relates to designing new policies and interventions.

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.

The adoption and spread of hospital care coordination activities under value-based programs.

OBJECTIVES: To examine the relationship between participation in value-based programs and care coordination activities. STUDY DESIGN: Cross-sectional, observational study of 1648 US hospitals using the American Hospital Association (AHA)'s 2013 Survey of Care Systems. Value-based program participation included participation in either an accountable care organization (ACO) or a bundled payment program. We assessed adoption (whether a hospital was using any of a set of 12 care coordination activities in the AHA survey) and spread (in each hospital adopting care coordination activities, how extensively those activities were implemented throughout the hospital). METHODS: Ordinary least squares regression assessed associations between participation in an ACO or bundled payment program and the adoption and spread of 12 care coordination activities. RESULTS: Hospitals adopted nearly two-thirds of the possible care coordination activities (mean [SD] = 7.9 [4.4] of 12). Among those hospitals adopting care coordination activities, there was a relatively moderate spread of these activities (mean = 2.5; range, 1 [minimally used] to 4 [used hospitalwide]). Hospital participation in an ACO was associated with the adoption of 3.07 more care coordination activities (P <.001), on average, and 0.16 more points on the scale of spread of care coordination activities (P <.001) compared with hospitals that were not participating in an ACO. Hospital participation in a bundled payment program was associated with the adoption of 1.84 more care coordination activities (b = 1.84; P <.001) but not greater spread (b = -0.04; P = .54). CONCLUSIONS: Value-based programs such as ACOs appear to encourage the adoption and spread of care coordination activities by hospitals.

Interorganizational Relationship Trends of Critical Access Hospitals.

PURPOSE: Examine the types of interorganizational relationships (IORs)--defined as formal linkages between 2 or more organizations to produce or coordinate some good or service--pursued by Critical Access Hospitals (CAHs), how these relationship patterns have changed over time, and how these relationships compare to non-CAHs. METHODS: We used univariate analyses to describe the prevalence of different types of formal horizontal (eg, system affiliation) and vertical (eg, physician organization, nursing home ownership) relationships for CAHs over time (2002-2012) and chi-square tests to compare the prevalence of these relationships to non-CAHs. FINDINGS: Contract management relationships were more prevalent among CAHs than other types of hospitals, and they declined over time for all types of hospitals. Network membership was more common among CAHs compared to rural, non-CAHs. Tightly integrated relationships with physician organizations were more common among CAHs, relative to rural, non-CAHs. Nursing home ownership was more prevalent among CAHs and rural, non-CAHs relative to urban, non-CAHs, but it declined over time for all hospital types. CONCLUSIONS: Our findings highlight a number of differences in the types of IORs pursued by CAHs relative to other types of hospitals and raise questions about the role of the Medicare Rural Hospital Flexibility Program in stimulating these differences. Our findings also suggest that even though the prevalence of hospitals engaging in any horizontal or vertical strategy was relatively stable, the fluctuations in the particular forms of these IORs were more dramatic.