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The geographical restructuring of urban hospitals: spatial dimensions of corporate strategy.

In response to demographic, economic and regulatory change, hospitals in the United States are increasingly adopting the diverse corporate strategies of private firms. The ability of a hospital to adopt these strategies and survive depends greatly on the nature of the hospital institution and the economic potential of its geographical market area. A typology is developed relating institutional strategies such as merger, expansion, diversification and closure to the size of the hospital and the socio-economic status of the neighborhood in which it is located. Data describing the geographical distribution, since 1967, of hospital closures, mergers and facility expansions in New York City are used to examine institutional strategies in relation to the typology. Closure has been most common among small hospitals located in low SES neighborhoods, whereas facility expansion has been most prevalent among large hospitals located in high status neighborhoods. The result is an increased concentration of patient care in large tertiary hospitals. Mergers have provided a means of not only increasing institutional size and rationalizing services, but also of establishing footholds in 'profitable' marked areas. The final section considers the role of the state in hospital restructuring.

Economic Competition

The effects of corporate restructuring on hospital policymaking.

Hospital corporate restructuring is the segmentation of assets or functions of the hospital into separate corporations. While these functions are almost always legally separated from the hospital, their impact on hospital policymaking may be far more direct. This study examines the effects of corporate restructuring by community hospitals on the structure, composition, and activity of hospital governing boards. In general, we expect that the policymaking function of the hospital will change to adapt to the multicorporate structure implemented under corporate restructuring, as well as the overlapping boards and diversified business responsibilities of the new corporate entity. Specifically, we hypothesize that the hospital board under corporate restructuring will conform more to the "corporate" model found in the business/industrial sector and less to the "philanthropic" model common to most community hospitals to date. Analysis of survey data from 1,037 hospitals undergoing corporate restructuring from 1979-1985 and a comparison group of 1,883 noncorporately restructured hospitals suggests general support for this hypothesis. Implications for health care governance and research are discussed.

Decision Making, Organizational

The state action doctrine and the Local Government Antitrust Act: the restructured public hospital model.

This Article analyzes the development and complexities of the antitrust state action doctrine and the Local Government Antitrust Act as these doctrines apply to both "municipalities" and private entities. The restructuring of a public hospital is used as a model to facilitate the antitrust analysis. The restructuring model, which typically involves the leasing of a hospital facility by a public entity to a private nonprofit corporation, offers the unique opportunity to compare the different standards employed under the state action doctrine and the Local Government Antitrust Act. As a practical matter, the Article provides a framework for a public hospital to evaluate the impact of corporate restructuring on its antitrust liability exposure and to develop strategies to minimize antitrust risks.

Economic Competition

Hospital diversification: corporate restructuring as a survival strategy.

Corporate restructuring of hospitals as a strategy for survival and continued success is described. Health-care providers' traditional orientation has been toward service and mission; now, profits and new markets in health care must be considered also. To remain competitive, hospitals must be prepared to act rapidly on opportunities. Corporate reorganization, the creation of new corporate entities that perform diversified medical and nonmedical functions, may provide the flexibility needed for quick action. Legal and accounting costs will be incurred by corporate reorganization. Tax issues, staff morale, community support, and effect on hospital managers and board members should be considered. Hospitals can cut costs through vertical integration of existing services; in this system-building strategy, new services can be added to broaden the patient base. Corporate reorganization is more important for diversification--the extension of a hospital's medical and health businesses--than for system building. Guidelines for diversification are offered. Corporate reorganization is a technique that should be considered in an institution's planning process.

Hospital Administration

State strategies to restructure psychiatric hospitals: a selective review.

All state mental health authorities are restructuring the role of their state psychiatric systems as part of the overall system of specialty psychiatric services. These efforts include shifting funds to community programs, changing the hospital from both a short- and long-term facility to one or the other, and giving community programs more administrative and budgetary authority over the hospitals. This paper presents case studies of five such efforts, selected to illustrate the range of change and the mechanisms for achieving it. Inferences are drawn from these studies and directions for research are suggested.

Health Resources

Redesigning hospital nursing practice: the Professionally Advanced Care Team (ProACT) model, Part 2.

The pressures of the current nursing shortage have created an unparalleled opportunity to restructure hospital nursing practice and care delivery. The potential exists to create new systems which simultaneously advance the goals of the profession and solve the problems of the shortage. Part 1 of this article (JONA, July/August, 1989) examined the similarities and differences among existing models and described the Robert Wood Johnson University Hospital ProACT model. Part 2 outlines the process of developing and implementing ProACT, an alternative nursing practice and care delivery model.

Costs and Cost Analysis

Specialized beds program: diversification options in skilled nursing facilities.

Serving patients in the SNF who need specialized, highly skilled care demands strong commitment, intensive planning, cooperative research, and continuous reassessment and evaluation. Specialty care programs are necessary to provide viable alternatives to acute care hospitalization for patients who need long term care. Health care organizations should continue their cooperative efforts to ensure the appropriate and cost effective use of services. Based on CCM's successful history of operating special care programs, providers should be encouraged to become leaders in developing specialized care alternatives. The appropriate use of long term care as well as acute care settings is in the best interest of patients, communities, and the health care industry itself.

Cost Control

Effects of a faculty prepaid group practice in a pediatric primary care clinic.

Medical student and resident education at a hospital-operated pediatric primary care clinic (PPCC) was threatened by chronic financial deficits and by a state mandate that all patients receiving medical care through the state Aid to Families with Dependent Children program be enrolled in a health maintenance organization (HMO). To comply with the mandate, the PPCC was reorganized in 1984 as a faculty-operated prepaid group practice independent of the hospital. The new PPCC contracted with an HMO to provide care, with reimbursement based on capitation. The PPCC continues to serve the same patient population as before the reorganization, continues its teaching activities, and no longer has financial deficits. The experience at this clinic shows that converting to a faculty prepaid group practice can be cost-effective, promote efficiency, and improve faculty-hospital relations. Such a group practice is an appropriate organization for maintaining medical education programs while providing care in a capitation payment system.

Aid to Families with Dependent Children