A Determination of the Association of Competition and Regulation With Hospital Strategic Orientation

This research study examines the influence of two major forces, competition and regulation, on the strategic orientation of hospitals. This is a particularly relevant subject, as the effectiveness of competition versus the effectiveness of regulation in the health care market has been called one of the Bellwether issues in health care policy, and the most controversial and far reaching philosophical battle facing the health care industry. Even after three decades of research and debate, there is still no consensus on how the hospital industry responds to either a competitive environment or a regulated environment. There continues to be significant variation across the country on which model provides the environmental context for hospitals, and there is no resolution of the issue on the horizon. It is clear that the dichotomy of a competitive environment or a regulated environment and the wide variation from market to market will continue to be significant factors influencing the development of hospital strategies. Developing strategies that provide an appropriate fit with the particular environmental context is a critical aspect of the success of an organization.This study provides a unique perspective on the subject, with an examination of the relationship between the level of competition in the market and the level of regulation in the market, and whether these dimensions influence hospital strategic orientation. Porter\u27s strategic orientation typology is used as the model for hospital strategy, and the theoretical framework combines the legitimacy seeking elements of institutional theory and the resource and cost control elements of resource dependency theory.The findings of this study indicate an association between a competitive environment and a differentiation orientation. As competition decreases, there is a greater likelihood of association with cost inefficiency. The results also indicate that in the absence of CON or as CON decreases, there is a greater likelihood of cost inefficiency. Although this study provides a timely analysis of a very controversial topic, it is clear that additional research efforts are needed on this critical issue that impacts every hospital in the country