Michael Gene Housman

Ambulatory surgery center and general hospital competition: entry decisions and strategic choices.

Background: General hospitals are consistently under pressure to control cost and improve quality. In addition to mounting payers’ demands, hospitals operate under evolving market conditions that might threaten their survival. While hospitals traditionally were concerned mainly with competition from other hospitals, today’s reimbursement schemes and entrepreneurial activities encouraged the proliferation of outpatient facilities such as ambulatory surgery centers (ASCs) that can jeopardize hospitals’ survival. Purpose: The purpose of this article was to examine the relationship between ASCs and general hospitals. More specifically, we apply the niche overlap theory to study the impact that competition between ASCs and general hospitals has on the survival chances of both of these organizational populations. Methodology: Our analysis examined interpopulation competition in models of organizational mortality and market demand. We utilized Cox proportional hazard models to evaluate the impact of competition from each on ASC and hospital exit while controlling for market factors. We relied on two data sets collected and developed by Florida’s Agency for Health Care Administration: outpatient facility licensure data and inpatient and outpatient surgical procedure data. Findings: Although ASCs do tend to exit markets in which there are high levels of ASC competition, we found no evidence to suggest that ASC exit rates are affected by hospital density. On the other hand, hospitals not only tend to exit markets with high levels of hospital competition but also experience high exit rates in markets with high ASC density. Practice Implications: The implications from our study differ for ASCs and hospitals. When making decisions about market entry, ASCs should choose their markets according to the following: demand for outpatient surgery, number of physicians who would practice in the surgery center, and the number of surgery centers that already exist in the market. Hospitals, on the other hand, should account for competition from ASCs while making market-entry decisions and while developing their strategic plans.

Dynamics of ambulatory surgery centers and hospitals market entry

In this article, we investigate the diversity of healthcare delivery organizations by comparing the market determinants of hospitals entry rates with those of ambulatory surgery centers (ASCs). Unlike hospitals, ASCs is one of the growing populations of specialized healthcare delivery organizations. There are reasons to believe that firm entry patterns differ within growing organizational populations since these markets are characterized by different levels of organizational legitimacy, technological uncertainty, and information asymmetry. We compare the entry patterns of firms in a mature population of hospitals to those of firms within a growing population of ASCs. By using patient-level datasets from the state of Florida, we break down our explanatory variables by facility type (ASC vs. hospital) and utilize negative binomial regression models to evaluate the impact of niche density on ASC and hospital entry. Our results indicate that ASCs entry rates is higher in markets with overlapping ASCs while hospitals entry rates are less in markets with overlapping hospitals and ASCs. These results are consistent with the notion that firms in growing populations tend to seek out crowded markets as they compete to occupy the most desirable market segments while firms in mature populations such as general hospitals avoid direct competition.