Strategic hospital alliances - Do the type and market structure of strategic hospital alliances matter?

BACKGROUND. Throughout the 1990s, hospitals formed local alliances to defen d against increasingly powerful hospital rivals and to improve their market positions relative to aggressive and consolidating managed-care organizati ons. An important consequence of hospitals combining or aligning horizontal ly at the local level is a significant consolidation of hospital markets. OBJECTIVE. The aim of this study was to examine the relationship between th e type of the local strategic hospital alliances (SHAs), market, environmen t, and operational factors with financial performance. METHODS. The study is a cross-sectional analysis of the financial performan ce across SHAs in all metropolitan statistical areas in 1995. RESULTS. SHAs With dominant or dominant for-profit (FP) hospitals are not m ore financially successful than other SHAs. SHAs in markets with high healt h maintenance organization (HMO) or SHA penetration have lower revenues per case-mix adjusted discharge. The operational characteristics, proportion o f teaching members in the SHA, and SHA bed size, result in higher revenues and expenses, whereas greater SHA technical efficiency results in lower cos ts. CONCLUSIONS. Health care organizations are centralizing their operations an d governance. This study shows that this trend has not added financial valu e to hospital collectives, at least at this point in their development.