Environmental turbulence, organizational capabilities and strategic response: Hospital strategy in an era of managed care
Managed care has had a profound influence on the demand for hospital services, as well as the agency relationship between hospitals and physicians. To succeed in this new environment hospitals must reconfigure the provision of services to meet these new demands and pressures. This thesis develops a model of the strategic interaction between hospitals and managed care organizations in which the level of services delivered by the hospital is a function of the contract form written by the HMO and the agency problem with physicians. The model suggests two possible strategic actions, capital adjustment and increases in monitoring, both of which may be effective in controlling the principal-agent problem between the physician and the hospital in the presence of managed care. Eleven three-stage least squared estimation systems are used to examine hospital changes in capacity, monitoring, HMO percentage and subsequent financial performance. The results suggest that hospital monitoring is an important determinant of the hospital's ability to serve HMO patients and that this translates into improved financial performance. In addition there is evidence that hospitals are reducing the level of capacity in response to managed care. These hospital responses have the effect of controlling the agency costs and affecting the organization's financial performance. These results have important implications for hospital strategy under managed care.
|Year of publication:||
|Authors:||Van Horn, Ray Lawrence|
|Type of publication:||Other|
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