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Is It Resources, Habit or Both: Interpreting Twenty Years of Hospital Strategic Response to Prospective Payment

Balotsky, Edward R.


Abstract: The 1983 Tax Equity and Fiscal Responsibility Act (TEFRA) transformed acute care from a benevolent to malevolent environment. A dual-paradigm of resource dependency and institutional theories that balances isomorphic with economic variables has emerged to better explain hospital strategic response to the resultant constraint on resources than a traditional single paradigm approach. Using the population of non-rural, non-federal acute-care hospitals, strategic response from 1982 to 2001 is studied; distinct cost and service changes occur. Cost strategy is linked primarily to Medicare utilization, a resource dependence response. Service strategy favors high technology regardless of prospective payment diffusion, an institutional theory perspective. Strategic implications are discussed.

Edward R. Balotsky, PhD, is Assistant Professor of Management, Saint Joseph's University, Haub School of Business, Department of Management, Philadelphia, PA. E-mail:

© 2005 Lippincott Williams & Wilkins, Inc.