Diversification of health care services: the effects of ownership, environment, and strategy

The present findings suggest that the trend toward greater diversification of hospital services is likely to be most strongly influenced by state Medicaid policies and certain hospital characteristics. Increasing Medicaid eligibility and payment levels is likely to have a positive effect on services diversification. Growth in the number of inpatient services provided and a more severe case mix are also likely to be involved with greater service diversification. Affiliation with a not-for-profit hospital system is likely to be associated with more diversified hospital services but not affiliation with an investor-owned system. There is also some indication that the overall portfolio of services which a hospital offers in regard to market share and market growth characteristics influences diversification. Specifically, a low market share portfolio is likely to be associated with less diversification. Competition is likely to be associated with more diversification; particularly for hospitals belonging to systems. The effect of competition on hospital strategy and services diversification is a particularly important area for further investigation. Increasing Medicaid payment and eligibility levels are also likely to have a positive effect on the provision of services which are usually unprofitable. Raising such levels is likely to be particularly beneficial to inner-city hospitals who are already providing a greater number of such services. However, the present data suggest that investor-owned hospitals are least likely to provide such services. Increasing Medicaid eligibility levels is also likely to be associated with fewer services for which charity care has to be provided. State regulation in the form of rate review and certificate of need is likely to be associated with more services for which hospitals provide some charity care. But such policies alone do not deal with the larger issue of how to finance care for the medically indigent. Present data suggest the charity care issue may be particularly salient in markets characterized by a relatively high degree of competition. Finally, investor-owned hospitals provide as many services involving charity care as not-for-profit system hospitals, although investor-owned system hospitals provide fewer such services than not-for-profit freestanding hospitals. Throughout, the findings indicate the importance of distinguishing between ownership and system affiliation. Previous research has failed to make a distinction between ownership form and system affiliation, thus attributing to ownership form differences which, as present findings suggest, appear to be more associated with system affiliation.(ABSTRACT TRUNCATED AT 400 WORDS)