Strategic alliances between physicians and hospitals in multihospital systems

Regional consolidation is one of the most frequently prescribed remedies for the ills facing hospitals today. Overcapacity, net revenue erosion, poor financial positioning, and high costs are some of the factors driving consolidation. One of the greatest challenges for multihospital systems is to align the interests among physicians practicing at the member hospitals and the system's corporate strategy (Hospitals 1990). This article offers a framework for analyzing these problems based on the economics of agency relationships and applies the framework to two case studies of strategic alliances between hospitals and physicians in a multihospital system. Both are examples of the physician-multihospital organization.