Strategic Alliances Among Rural Hospitals

This was a study of strategic alliances of rural health care provider organizations in the United States; with an emphasis on cooperative societies or cooperative- like alliances. The underlying hypothesis was that the scale; scope; efficiency; and quality problems of rural health care can be reduced by better coordination and rationalization of the delivery system and that this coordination and rationalization can be achieved through strategic alliances of provider organizations. The study divided alliances into three types: cooperatives; consortia; IRS 501(c)(3) or (4) organizations that rely on grants for the majority of their funding; tied networks; that are organized and led by a major urban; tertiary hospital. The cooperatives were described as self-help organizations; while the consortia and tied networks were other-help organizations. Consumer cooperatives; not included in this study; have been formed in the United States for the purpose of starting prepaid health plans or underwriting clinics in communities having trouble retaining a doctor. While rare today; such coops were comparatively numerous in rural America during the 1930s because of a federal government facilitating loan program. The report of the findings: (1) reviews the activities and functions of these alliances and makes specific recommendations regarding activItIes that can and should be organized cooperatively; (2) makes recommendations regarding capitalization; sources of funding; pricing; and dividend policy; (3) reviews and makes recommendations regarding organization; membership; legal structure; and governance structure. With regard to both the efficiencies associated with economies of scale and scope and the efficiencies in governance transaction costs; the tied networks were somewhat more efficient than were the cooperatives and consortia. The latter two need; and have; at least one urban hospital associated with them to help in achieving the scale and scope required to offer some specialized services. Therefore; any case favoring rural hospital cooperatives over tied networks must be based on avoiding a conflict in objectives and the effectiveness with which a cooperative can coordinate and enrich the rural health care delivery system in a region. All members must see clearly that local autonomy can only be achieved through cooperative efforts. It is a role that requires patience and allows the rural hospitals to lead the cooperative. The rural community hospital boards and managements need to learn empowerment and not dependence.