Market and organizational factors associated with hospital vertical integration into sub-acute care

Tory H. Hogan, Christy Harris Lemak, Larry R. Hearld, Bisakha P. Sen, Jack R.C. Wheeler, Nir Menachemi

Research output: Contribution to journalArticle

Abstract

Background: Changes in payment models incentivize hospitals to vertically integrate into sub-acute care (SAC) services. Through vertical integration into SAC, hospitals have the potential to reduce the transaction costs associated with moving patients throughout the care continuum and reduce the likelihood that patients will be readmitted. Purpose: The purpose of this study is to examine the correlates of hospital vertical integration into SAC. Methodology/Approach: Using panel data of U.S. acute care hospitals (2008-2012), we conducted logit regression models to examine environmental and organizational factors associated with hospital vertical integration. Results are reported as average marginal effects. Findings: Among 3,775 unique hospitals (16,269 hospital-year observations), 25.7% vertically integrated into skilled nursing facilities during at least 1 year of the study period. One measure of complexity, the availability of skilled nursing facilities in a county (ME = -1.780, p <.001), was negatively associated with hospital vertical integration into SAC. Measures of munificence, percentage of the county population eligible for Medicare (ME = 0.018, p <.001) and rural geographic location (ME = 0.069, p <.001), were positively associated with hospital vertical integration into SAC. Dynamism, when measured as the change county population between 2008 and 2011 (ME = 1.19e-06, p <.001), was positively associated with hospital vertical integration into SAC. Organizational resources, when measured as swing beds (ME = 0.069, p <.001), were positively associated with hospital vertical integration into SAC. Organizational resources, when measured as investor owned (ME = -0.052, p <.1) and system affiliation (ME = -0.041, p <.1), were negatively associated with hospital vertical integration into SAC. Practice Implications: Hospital adaption to the changing health care landscape through vertical integration varies across market and organizational conditions. Current Centers for Medicare and Medicaid reimbursement programs do not take these factors into consideration. Vertical integration strategy into SAC may be more appropriate under certain market conditions. Hospital leaders may consider how to best align their organization's SAC strategy with their operating environment.

Original languageEnglish (US)
Pages (from-to)137-147
Number of pages11
JournalHealth Care Management Review
Volume44
Issue number2
DOIs
StatePublished - Apr 1 2019

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Subacute Care
Skilled Nursing Facilities
Medicare
Organizational factors
Vertical integration
Market factors
Bed Conversion
Geographic Locations

Keywords

  • resource dependence theory
  • skilled nursing facilities
  • sub-acute care
  • vertical integration

ASJC Scopus subject areas

  • Leadership and Management
  • Health Policy
  • Strategy and Management

Cite this

Market and organizational factors associated with hospital vertical integration into sub-acute care. / Hogan, Tory H.; Lemak, Christy Harris; Hearld, Larry R.; Sen, Bisakha P.; Wheeler, Jack R.C.; Menachemi, Nir.

In: Health Care Management Review, Vol. 44, No. 2, 01.04.2019, p. 137-147.

Research output: Contribution to journalArticle

Hogan, Tory H. ; Lemak, Christy Harris ; Hearld, Larry R. ; Sen, Bisakha P. ; Wheeler, Jack R.C. ; Menachemi, Nir. / Market and organizational factors associated with hospital vertical integration into sub-acute care. In: Health Care Management Review. 2019 ; Vol. 44, No. 2. pp. 137-147.
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