Market-Based Strategy Helps Charitable California Hospital Chain Reorganize and Reverse Financial Losses - While Maintaining Its Mission

Research on corporate finance and consolidation in health care

In this 2002 to 2005 project, James C. Robinson, PhD, MPH, and researchers at the University of California, Berkeley, School of Public Health, analyzed the role of financial capital, capital investment strategy and market dynamics in the consolidation of the health insurance and hospital industries. Their work included a case study about the strategy that enabled Catholic Healthcare West, a 40-hospital chain, to reorganize and reverse major financial losses, while preserving its charitable mission.

This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO). HCFO supports policy analysis, research, evaluation and demonstration projects that provide public and private decision leaders with usable and timely information on health care policy and financing issues.

Key Findings

  • The researchers reported the following findings:

    • Catholic Healthcare West's capital investment strategy, focused on selective diversification, improved its operating performance significantly.
    • Four core competencies enabled Catholic Healthcare West's strategy to succeed:
      • Having the ability to evaluate existing and potential markets.
      • Understanding the best way to deploy internal capabilities.
      • Having the necessary financial resources to take advantage of new opportunities.
      • Having the discipline to exit underperforming markets and services.
    • In regaining financial stability, Catholic Healthcare West's determination to preserve its social mission was as important as its market strategy.

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