The effect of location, strategy, and operations technology on hospital performance

Hospitals in the US are faced with challenges in how to compete and remain viable in an increasingly competitive environment. Using data from a primary survey of hospitals and from various secondary sources, we investigate the incremental effects on hospital performance of location, strategy, and technology. We find that hospital location is significantly related to performance, but that a hospital’s choice of strategy can moderate the effect of location. Additionally, we find hospitals that invest more extensively in clinical technologies tend to be better performers regardless of location. Hospital size, measured as number of beds, captures the effects of location and technology investment in accounting for a major portion of hospital performance. While we cannot argue that larger is always better for hospitals, mergers, partnerships, and other forms of consolidation currently observed in the marketplace indicate that managers in the hospital industry understand the advantage of size. © 2002 Elsevier Science B.V. All rights reserved.