Hospital Competitive Strategies and Performance Outcomes

Hospitals are under increasing pressure to improve performance and healthcare outcomes. The existing literature does not point to a clear conclusion on whether competition can help address the performance challenges of hospitals which lead to improvements in clinical outcomes. Prior research on the effects of hospital competitive strategies usually focuses on one strategy or one type of outcome at a time. As such, there is a dearth of systematical studies on different hospital competitive strategies and their consequent performance outcomes.

The main objective of this dissertation is to examine several hospital competitive strategies and quantitatively validate the implications of each strategy relative to commonly used operational, financial, and clinical metrics of hospital performance. This study leverages prior research on competition in healthcare and other industries. It proposes a framework for hospital competition, which consists of three distinct competitive strategies: i) competing on quality, ii) competing on process execution, and iii) competing on service diversification.

By utilizing hospital-level secondary data sources spanning 2004 to 2011, this dissertation analyzes empirically the performance outcomes of hospitals adopting different competitive strategies in California. The first part of the dissertation employs a set of widely recognized quality awards to identify hospitals which excel in providing quality care. A sample-control matched study is conducted to quantify the benefits associated with competing on quality and winning a quality award. The second part of the dissertation uses difference-in-differences models to study the impact of competing on process execution, as measured by operational measures such as length of stay and cost per discharge. The third part utilizes Data Envelopment Analysis (DEA) to investigate the ramifications of competing on service diversification. It also verifies the robustness of results pertaining to competitions on quality and process execution obtained earlier in the dissertation based on linear regression models.

This dissertation represents one of the first efforts to estimate quantitatively the implications of competitive positioning strategies on hospital performance. The results can provide guidance for theory and practice with respect to the strategy that leads to highest improvement in hospital efficiency, as a function of a hospital's unique set of characteristics.