No abstract

EXECUTIVE SUMMARY Financial distress is a persistent problem in U.S. hospitals, leading them to close at an alarming rate over the past two decades. Given the potential adverse effects of hospital closures on healthcare access and public health, interest is growing in understanding more about the financial health of U.S. hospitals. In this study, we set out to explore the extent to which relevant organizational and environmental factors potentially buffer financially distressed hospitals from closure, and even at the brink of closure, enable some to merge with other hospitals. We tested our hypotheses by first examining how factors such as slack resources, environmental munificence, and environmental complexity affect the likelihood of survival versus closing or merging with other organizations. We then tested how the same factors affect the likelihood of merging relative to closing for financially distressed hospitals that undergo one of these two events. We found that different types of slack resources and environmental forces impact different outcomes. In this article, we discuss the implications of our findings for hospital stakeholders.

Our findings highlight a number of differences in the types of IORs pursued by CAHs relative to other types of hospitals and raise questions about the role of the Medicare Rural Hospital Flexibility Program in stimulating these differences. Our findings also suggest that even though the prevalence of hospitals engaging in any horizontal or vertical strategy was relatively stable, the fluctuations in the particular forms of these IORs were more dramatic.

Background Nursing homes face increased risk of closure because of poor financial performance. Purpose Using resource dependency theory, Porter’s Five Forces of Competition framework, and Altman’s Z-score model, this study examines the relationship between market factors and nursing home financial distress. Methodology/Approach This study utilizes Medicare Cost Reports, LTCFocus, Certification and Survey Provider Enhanced Reporting, Online Survey Certification and Reporting, and the Area Health Resource File to examine an average of 10,454 nursing homes per year from 2000 to 2015. Using Porter’s framework, market factors were conceptualized as the bargaining power of buyers and suppliers, threat of substitutes and new entrants, and industry rivalry. Organizational control variables include occupancy, payer mix, size, and chain affiliation. Data were analyzed using multinomial logistic regression with robust clustering, year, and state fixed effects. Results Distressed nursing homes (Relative Risk Ratios [RRR] = 0.991) were less likely to be in counties with higher Medicaid concentration. Distressed (RRR = 0.717) and at-risk-of-distress nursing homes (RRR = 0.807) were less likely to be in markets with home health agencies, and nursing homes at risk of distress (RRR = 1.005) were more likely to be in markets with a higher number of hospital-based skilled nursing facility beds compared to healthy organizations. The organizational-level variables, occupancy, payer mix, size, and chain affiliation had a significant impact on nursing home financial distress. Conclusions The effects of external market forces on nursing home financial distress were limited; however, organizational-level variables had a significant impact on nursing home financial distress. Practical Implications Study findings can inform policy makers on specific factors associated with nursing home financial distress and provide greater insight as it relates to designing new policies and interventions.