Background: Safety net hospitals (SNH) have, on average, experienced declining financial margins and faced an elevated risk of closure over the past decade. Despite these challenges, not all SNHs are weakening and some are prospering. These higher-performing SNHs provide substantial care to safety net populations and produce sustainable financial returns.
Purpose: Drawing on the alternative structural positioning and resource-based views, we explore strategic management as a source of performance differences across SNHs.
Methodology/Approach: We employ a mixed-method design, blending quantitative and qualitative data and analysis. We measure financial performance using hospital operating margin and quantitatively evaluate its relationship with a limited set of well-defined structural positions. We further evaluate these structures and also explore the internal resources of SNHs based on nine in-depth case studies developed from site visits and extensive interviews.
Findings: Quantitative results suggest that structural positions alone are not related to performance. Comparative case studies suggest that higher-performing SNH differ in four respects: (1) coordinating patient flow across the care continuum, (2) engaging in partnerships with other providers, (3) managing scope of services, and (4) investing in human capital. On the basis of these findings, we propose a model of strategic action related to systems thinking — the ability to see wholes and interrelationships rather than individual parts alone.
Practice Implications: Our exploratory findings suggest the need to move beyond generic strategies alone and acknowledge the importance of underlying managerial capabilities. Specifically, our findings suggest that effective strategy is a function of both the internal resources (e.g., managers’ systems-thinking capability) and structural positions (e.g., partnerships) of organizations. From this perspective, framing resources and positioning as distinct alternatives misses the nuances of how strategic advantage is actually achieved.