Organizational Ecology and the Proliferation of Specialty Hospitals

Abstract

This dissertation examines the proliferation of specialty hospitals in the United States. Since the 1990s specialty hospitals increased in number and stirred much controversy, given that most are for-profit and physician-owned. They are examined here according to the Organizational Ecology Theory, a theoretical framework used in many industries to explain the founding of new organizational forms. Given that general hospitals have been the dominant organizational form in the hospital industry, the emergence of specialty hospitals is explained in this dissertation by applying organizational ecology theories: resource partitioning, density dependence and niche formation. Moreover, I examine the effect environmental and institutional variables have on the variations in specialty hospital proliferation between different states in the United States. The data used in this dissertation are mainly derived from the American Hospital Association Annual Database and the Area Resource File. The Negative Binomial Generalized Estimating Equations method is used to test the models in Stata 9. The findings from this dissertation provide support to both the density dependence, niche formation, and resource partitioning theories. The volume of surgical procedures seems to have a positive effect on the number of new specialty hospitals in a state. Specialty hospitals founding rates also seems to be positively related to the closure rate of general hospitals. Moreover, specialty hospitals founding rate was significantly affected by the intra-population density of specialty hospitals in the area they were founded. As for environmental and institutional factors, the presence of a Certificate of Need program negatively affects the founding rate of specialty hospitals in a state when specialty hospital density is not accounted for in the model. Economical variables, on the other hand, were significant in all the models. Specialty hospitals were positively related to state per capita income and negatively related to unemployment rate. One of the interesting findings of this study is that specialty hospitals founding rate is negatively related to physician expenditures. Thus, less income might be inducing physicians to open their hospitals to recoup financial losses. This dissertation is not just important due to its contribution to organizational ecology, it is also important because it explains to policy makers the reasons that lead to the proliferation of specialty hospitals and the future of these new entrants into the health care arena.