Organizational Characteristics and Environmental Factors Associated with Hospitals Identified as Consolidation Targets

Abstract

In today’s dynamic health care landscape, hospitals face uncertainty and financial strain from changing reimbursement schemas, intense government regulation, technological advances, consumer demand, and workforce scarcity. These increased pressures have led to an acceleration of consolidation activities as hospitals position themselves to cope with a shifting, complex external environment by maximizing resources, creating economies of scale, and expanding access to care. Despite increased hospital consolidation activity, scholars know little about what makes a hospital attractive as a consolidation target to an acquiring organization, particularly after the Affordable Care Act.

The purpose of this study is to evaluate the organizational characteristics and environmental factors associated with hospitals identified as targets through the lens of resource dependence theory. A multivariate binary logistic regression model is used to analyze the differences between hospitals selected as consolidation targets and hospitals that were not.

Our findings were somewhat mixed; we found weak support found for one hypothesis (sociodemographic factors), partial support for two of the six hypotheses (structural characteristics, competitive factors), and no support for three of the hypotheses (operational performance, financial performance, physical factors). The results suggest that while operational performance is important to hospital success, acquiring organizations tend to be motivated by traditionally favorable organizational characteristics (i.e., ownership status) and market factors (i.e., Herfindahl-Hirschman Index).