Strategic adaptations to PPS by rural hospitals: implications for theory and research

Abstract

Medicare's Prospective Payment System (PPS) has introduced a new environment in which hospitals must either alter their strategies for delivering services or face closure. This is a challenge for rural hospitals that often lack the resources and supportive economic climate of their urban counterparts. Few guidelines are available to assist rural hospitals in responding organizationally to PPS-induced constraints. This article examines the plight of rural hospitals from the perspective of strategic adaptation. A conceptual framework is proposed for studying strategic adaptations to PPS by rural hospitals. The implications for developing a sound research methodology are also discussed. On the basis of this research agenda, it may be possible to clarify how rural hospitals should adapt to PPS (and similar) constraints now, and in the future.