U.S. Hospital Industry Restructuring and the Hospital Safety Net

Abstract

The U.S. hospital industry was reshaped during the 1990s, with many hospitals becoming members of health systems and networks. Our research examines whether safety net hospitals (SNHs) were generally included or excluded from these arrangements, and the factors associated with their involvement. Our analysis draws on the earlier work of Alexander and Morrisey (1988), and not only studies factors affecting SNH participation in multihospital arrangements but also updates their earlier study. We constructed measures for hospital market conditions, management, and mission, and examined network and system affiliation patterns between 1994 and 1998. Our findings suggest that larger and more technically advanced hospitals joined systems in the 1990s, which contrasts with 1980s findings that smaller, financially weak institutions joined systems. Further, SNH participation in networks and systems was more common when hospitals faced less market pressure and where only a limited number of unaffiliated hospitals remained. If networks and systems are key parties in negotiating with private payers, SNHs may be going it alone in these negotiations in highly competitive markets.