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Hospital CEOs' views of health care competition influence their choice of physician-organization integration strategies

Competition and managed care are often cited as the primary drivers behind hospitals' adoption of physician-organization integration (POI) strategies. However, after controlling for objective measures of competition, resource availability, and managed care, CEOs of some types of hospitals still viewed competition differently than CEOs of other types of hospitals. Furthermore, how hospital CEOs viewed competition influenced hospital POI strategies, according to a study supported in part by the Agency for Healthcare Research and Quality (HS09183).

Hospital CEOs' views of the competitive medical care environment partly hinge on the institutional context in which they work and, to a lesser extent, their personal background and training, explains Jeffrey A. Alexander, Ph.D., of the University of Michigan. Dr. Alexander and his colleagues from the University of Alabama at Birmingham and the University of Pennsylvania examined the role of hospital CEO perceptions of competition in predicting the adoption of five different POI strategies. Controlling for the task environment and organizational characteristics of the hospital, CEO perceptions of greater general market competition were positively related to networking and joint ventures, use of physicians in management and governance, and provision of services to physicians; negatively associated with cost information sharing; and not significantly associated with salary and ownership.

Neither measure of managed care (HMO penetration rate or number of HMOs) was significantly associated with CEOs' perceptions of market competition, but this was during a period when managed care and competition had yet to dominate strategic thinking of hospitals and physicians. CEOs of larger and investor-owned hospitals perceived higher levels of competition in their markets, independent of the effects of other organizational variables. Public ownership (relative to voluntary hospitals) was negatively (but marginally) associated with CEO perceptions of market competition. CEO experience factors had little impact on perceptions of hospital competition. Physician CEOs were much more likely to view their markets as competitive, all other factors being equal.

See "CEO perceptions of competition and strategic response in hospital markets," by Dr. Alexander, Lawton R. Burns, Ph.D., Michael A. Morrisey, Ph.D., and Victoria Johnson, Ph.D., in the June 2001 Medical Care Research and Review 58(2), pp. 162-193.

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