Determinants of profound organizational change: choice of conversion or closure among rural hospitals

Because of severe operating and resource constraints, many rural community hospitals are confronted with pressures to abandon core strategies related to acute inpatient care. Little is known, however, about why hospitals would choose to convert to organizations that provide non-acute care health services as an alternative to closure. We argue that rural hospitals are more likely to convert when conditions are in place that enable them to make major shifts from their current domains to ones that are more hospitable. To the extent that resources are available in alternative domains and rural hospitals possess the strategies necessary to exploit these resources, rural hospitals are more likely to convert rather than close. To examine our proposed hypotheses, we analyze national data from all rural hospitals from 1984 through 1991. Results indicate that conversion is more likely to occur than closure when resources in the market are abundant, competition for hospital resources is high, and hospitals have established strategies to provide alternative forms of health care. Findings from this study indicate that environmental and organizational factors can increase a rural hospital's risk of conversion as an alternative to closure.