Multihospital System Affiliation as a Survival Strategy for Rural Hospitals Under the Prospective Payment System

Michael T. Halpern, Jeffrey A. Alexander, Mary L. Fennell

Research output: Contribution to journalArticle

18 Scopus citations

Abstract

The introduction of Medicare's Prospective Payment System (PPS) has disproportionately increased financial pressures on rural hospitals and posed challenges to the survival of these institutions. Increasingly, rural hospitals are seeking strategies that can enhance their chances for survival in a turbulent and hostile environment. This study examined the survival effects of one such strategy, multihospital system affiliation. Specifically, we assessed: (1) whether and how different types of system affiliation in the post‐PPS era affect the likelihood of rural hospital survival; (2) whether particular structural, environmental and hospital performance characteristics moderate the effects of system affiliation on rural hospital survival; and (3) whether systematic selection by rural hospitals into multihospital systems potentially accounts for observed relationships between system affiliation and survival. Proportional hazards analyses indicate that system affiliation with investor‐owned systems significantly reduces survival probabilities of rural hospitals. Affiliation with not‐for‐profit systems or system affiliation under contract management arrangements does not affect survival probabilities of rural hospitals. These general findings are moderated by the effects of hospital ownership and size at the time of affiliation. Finally, study findings indicated that systematic selection by poor performing rural hospitals into investor‐owned systems has occurred in the post‐PPS era. No evidence of selection into not‐for‐profit systems was discovered.

Original languageEnglish (US)
Pages (from-to)93-105
Number of pages13
JournalThe Journal of Rural Health
Volume8
Issue number2
DOIs
StatePublished - Mar 1992

ASJC Scopus subject areas

  • Public Health, Environmental and Occupational Health

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