RURAL HOSPITAL SYSTEM AFFILIATIONS AND THEIR EFFECTS ON HOSPITAL ECONOMIC PERFORMANCE, 2004-2008

RURAL HOSPITAL SYSTEM AFFILIATIONS AND THEIR EFFECTS ON HOSPITAL ECONOMIC PERFORMANCE, 2004-2008 By Mark Doughton Swofford, Ph.D., MHA, FACHE A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy at Virginia Commonwealth University. Virginia Commonwealth University, 2011 Major Director: Stephen S. Mick, Professor, Department of Health Administration The formation of multi-hospital systems represents one of the largest structural changes in the hospital industry. As of 2008, system affiliated hospitals outnumbered stand alone hospitals 2511 to 2167 and the percentage of system affiliated rural hospitals has increased dramatically from 24.8% in 1983 to 42.2% in 2008 (based on AHA data for non-federal acute care general hospitals). The effects of system membership on hospital performance have been of great interest to health care researchers, but the majority of research on multi-hospital systems has either focused exclusively on urban facilities or pooled urban and rural facilities in the same sample, and thus failed to allow for potential differences in membership effects between urban and rural hospitals. The result is that the effect of system membership on rural hospital performance has remained largely unexplored, creating a gap in the body of health services research. The objectives of this study are both theoretical and empirical. Theoretically, this study is intended to be a deliberate empirical application of contingency theory, which is xiii the one major organizational theory that seeks to explain variations in organizational performance as its fundamental purpose. Empirically, this study seeks to explore the relationship between rural hospital system membership and rural hospital performance, taking into account the environment of the rural hospital and the structure of the multihospital system to which it belongs. The study sample consists of 1010 non-federal, short-term, acute care general rural hospitals with consistent system membership and critical access hospital (CAH) status from 2004 to 2008. Hospital economic performance is represented by the dependent variables of hospital total margin and a productive efficiency score calculated using Data Envelopment Analysis (DEA). Four contingent pairs containing measures for environmental munificence, system membership, the presence of local system partners, the presence of hierarchical system partners, and CAH status, were used to measure a hospital’s fit between environment and structure. Regression analysis was used to determine the relationship between hospital performance and the fit between a hospital’s environment and its organizational/system structure. Results of the analysis indicate that hospitals with a better fit have significantly higher total margins, but results for productive efficiency were largely insignificant. Given the lack of research focused on the effects of rural hospital system membership and the infrequent use of contingency theory in recent health services research, this study offers important findings and methodological examples to the field of health services research.