Does planning pay off? A look at the experience of New Mexico's rural hospitals

When Medicare's prospective payment system (PPS) was implemented, hospitals faced the prospect of diminishing reimbursement. Added to other fundamental changes involving medical practice, consumerism, competition, and medical technology, hospitals had significant incentives to focus more attention on strategic planning. This article examines how rural hospitals altered their strategic planning in response to PPS and the extent to which planning is related to better performance. It presents results from a case study of rural New Mexico hospitals. The implications of these results for other hospitals are discussed by the authors.