Competitive strategy in turbulent markets: A multivariate analysis of strategic management in teaching hospitals

Teaching hospitals are facing a highly unpredictable and uncertain future. The once placid and stable industry which allowed teaching hospitals to practice academic medicine in a financially secure environment has been replaced by an extremely turbulent and competitive marketplace. This turbulence threatens the financial viability of teaching hospitals.; Within the private sector, strategic management is the field of study that has emerged in response to environmental turbulence. The central objective of strategic management is to create a competitive advantage by linking competitive strategies, the environment, and financial performance. Therefore, the purposes of this study were to examine the concepts of strategic management in teaching hospitals and to determine the relationships that existed among competitive strategies, the environment, and financial performance in a rapidly evolving and turbulent health care marketplace.; There were twenty independent variables measuring the competitive strategies and market environment for one hundred major teaching hospitals. The dependent variable was financial return on invested capital. The research design was correlational, using a multivariate regression model. Descriptive statistics, correlations, t-tests, and multiple linear regressions were the techniques used to analyze the data.; Research findings indicate that teaching hospitals can use strategic management to improve financial performance. Those organizations which aligned their strategies to the environment significantly outperformed other hospitals financially. In addition, results suggest that: (1) the most significant competitive strategy influencing teaching hospital financial performance is pricing strategy, aimed at increasing the margin between price and costs; (2) the portfolio of service lines offered in the product market strategy must be carefully identified and managed by focusing on only those products and markets which are positioned for success. (For this sample, the product market strategy included a reduction in both Medicare and outpatient products); and (3) maintaining and strengthening the commitment to medical education leads to improved financial returns. Additional significant relationships among strategies, the environment, and performance provide direction for future strategic and managerial changes in teaching hospitals. The findings suggest that in turbulent markets, new forms of competitive strategies must be formulated and implemented by teaching hospitals if they are to survive, grow, and prosper.