Horizontal and vertical integration-diversification in rural hospitals: a national study of strategic activity, 1983-1988.

Abstract

This study examines both the magnitude of and factors influencing the adoption of 13 horizontal and vertical integration and diversification strategies in a national sample of 797 U.S. rural hospitals during the period 1983-1988. Using organization theory, hypotheses were posed relating environmental and market factors, geographic location, and hospital characteristics to the adoption of horizontal and vertical integration and diversification. Results indicate that only one of 13 strategies was adopted by more than 50 percent of all rural hospitals during the study period, and that most of the directional hypotheses were not confirmed using Cox's proportional hazards models. In particular, environmental and market factors were unrelated to the strategies studied. Issues of methodology and theory are discussed; however, during an historically turbulent period, both relatively low levels of rural hospital strategic activities and lack of predictive power of the theory suggest caution in relying heavily on a policy for rural hospital survival that is dependent on individual market-oriented strategic behavior.