Sustaining the Edge: Factors Influencing Strategy Selection in Academic Health Centers

Abstract

Competition within the acute care sector as well as increased penetration by managed care organizations has influenced the structure and role of academic health centers during the past decade. The market factors confronting academic health centers are not dissimilar from conditions that confront other organizations competing in mature industries characterized by declining profitability and intense rivalry for market share. When confronted with intense competition or adverse external events, organizations in other industries have responded to potential threats by forming alliances, developing joint ventures, or merging with another firm to maintain their competitive advantage. Although mergers and acquisitions dominated the strategic landscape in the healthcare industry during the past decade, recent evidence suggests that other types of strategic ventures may offer similar economic and contracting benefits to member organizations. Academic health centers have traditionally been involved in network relationships with multiple partners via their shared technology, collaborative research, and joint educational endeavors. These quasi-organizational relationships appear to have provided a framework for strategic decisions and allowed executives of academic health centers to select strategies that were competitive yet closely aligned with their organizational mission. The analysis of factors that influenced strategy selection by executives of academic health centers suggests a deliberate and methodical approach to achieving market share objectives, expanding managed care contracts, and developing physician networks.