Strategic Hospital Alliances

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Abstract
Throughout the 1990s, hospitals formed local alliances to defend against increasingly powerful hospital rivals and to improve their market positions relative to aggressive and consolidating managed-care organizations. An important consequence of hospitals combining or aligning horizontally at the local level is a significant consolidation of hospital markets. The aim of this study was to examine the relationship between the type of the local strategic hospital alliances (SHAs), market, environment, and operational factors with financial performance. The study is a cross-sectional analysis of the financial performance across SHAs in all metropolitan statistical areas in 1995. SHAs with dominant or dominant for-profit (FP) hospitals are not more financially successful than other SHAs. SHAs in markets with high health maintenance organization (HMO) or SHA penetration have lower revenues per case-mix adjusted discharge. The operational characteristics, proportion of teaching members in the SHA, and SHA bed size, result in higher revenues and expenses, whereas greater SHA technical efficiency results in lower costs. Health care organizations are centralizing their operations and governance. This study shows that this trend has not added financial value to hospital collectives, at least at this point in their development.