Journal of Strategy and Management

Healthcare strategic management and the resource based view

Bita Arbab Kash Aaron Spaulding Larry D. Gamm Christopher E. Johnson
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Healthcare
Healthcare strategic management strategic
and the resource based view management
Bita Arbab Kash
Department of Health Policy and Management,
Texas A&M Health Science Center, College Station, Texas, USA
251
Aaron Spaulding Received 18 June 2013
Department of Public Health, Brooks College of Health, Revised 19 November 2013
19 December 2013
University of North Florida, Jacksonville, Florida, USA Accepted 23 December 2013
Larry D. Gamm
Department of Health Policy and Management,
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Texas A&M Health Science Center, College Station, Texas, USA, and
Christopher E. Johnson
Department of Health Services, University of Washington,
Seattle, Washington, USA

Abstract
Purpose – The purpose of this paper is to examine how two large health systems formulate
and implement strategy with a specific focus on differences and similarities in the nature of
strategic initiatives across systems. The aim is to gain a better understanding of the role of
resource dependency theory (RDT) and resource based view (RBV) in healthcare strategic
management.
Design/methodology/approach – A comparative case study design is used to describe, categorize
and compare strategic change initiatives within a children’s health and a multi-hospital system located
in two competitive metropolitan markets. A total of 61 in-person semi-structured interviews with
healthcare administrators were conducted during 2009. Summary statistics and qualitative content
analysis were employed to examine strategic initiatives.
Findings – The two health systems have as their top initiatives very similar pursuits, thus indicating
that both utilize an externally oriented RDT method of strategy formulation. The relevance of the RBV
becomes apparent during resource deployment for strategy implementation. The process of healthcare
strategic decision-making incorporates RDT and RBV as separate and compatible activities that are
sequential.
Research limitations/implications – Results from this comparative case study are based on only
two health systems. Further, the RBV perspective only takes managerial resources and time into
consideration.
Practical implications – Given that external resources are likely to become more constrained, it is
important that hospitals leverage relevant internal resources, in the identification of competitive
advantages and effective execution of strategic initiatives.
Originality/value – The author propose a refined healthcare strategic management framework that
takes both RDT and RBV into consideration by systematically linking strategy formulation with
deployment of resources.
Keywords Strategy implementation, Resource based view, Healthcare strategic planning,
Strategic management framework
Paper type Case study
Journal of Strategy and Management
Vol. 7 No. 3, 2014
pp. 251-264
r Emerald Group Publishing Limited
This study was funded by the National Science Foundation’s Center for Health Organization 1755-425X
Transformation’s Grant No. IIP-0832439. DOI 10.1108/JSMA-06-2013-0040
 JSMA Introduction
7,3 Organizational strategy is dependent upon a defined mission or set of objectives that
are intended to help direct an organization toward a desired outcome (Rangan, 2004).
However, despite having overarching goals to accomplish, the manner that an
organization chooses to fulfill its mission is often limited by resource availability
(Froelich, 1999; Nimwegen et al., 2008; Rangan, 2004). Resources can be internal or
252 external to the organization, and be further segmented into resources an organization
acquires or resources an organization already owns. How a healthcare organization
views the state of its internal and external resources and coordinates the deployment
of these resources dramatically affects strategic decision making and fulfillment of
strategic goals.
The purpose of this comparative case study is to examine the similarities and
differences in strategic decision making across two large metropolitan health
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systems operating in two separate markets within the same state. Resource
dependency theory (RDT) and the resource based view (RBV) theory are used to
interpret responses to environmental factors and internal resource considerations
in strategy development (Swayne et al., 2006; Barney and Clark, 2007; Hillman et al.,
2009; Pfeffer and Salancik, 1978). Each theory (RDT and RBV) contributes to how
healthcare managers can behave as they analyze their external and internal situation
and resources.
This comparative case study adds to our understanding about the nature of
strategic decisions and initiatives, their differences and similarities, and how managers
allocate resources during strategy implementation. Interpretation of results from
this analysis will also assist in the development of a conceptual framework for
healthcare strategic management.

Internal and external resource considerations in healthcare strategic management

The application of externally oriented RDT in strategic planning and management is
closely tied to related and well-studied theories including: open systems theory,
institutional theory and transaction cost economics. All explain how environmental
forces influence organizational decisions (Pfeffer and Salancik, 1978; Jensen and
Meckling, 1976; Williamson, 1975; Meyer and Rowan, 1977). RDT is focussed on how
managers act strategically to reduce environmental uncertainty and dependence
(Pfeffer and Salancik, 1978), and it has been proven to be relevant through years
of empirical research (Hillman et al., 2009). RDT, together with transaction cost theory
(Williamson, 1975) are often the primary perspectives strategists use to understand
mergers and acquisitions, joint ventures, and vertical integration (Hillman et al., 2009;
Meznar and Nigh, 1995; Pfeffer and Salancik, 1978).
RDT has been closely aligned with healthcare strategic management over the last
four decades of regulatory demands, payment structure changes and uncertainties
about the external dependencies as reflected in the healthcare strategic planning
literature (Shortell et al., 1990; Swayne et al., 2006). The resource dependency
perspective and seemingly increasing external environmental pressures often results
in a limited number of viable strategic options. This condition promotes a theory-based
expectation of hospitals clustering into strategic groups resulting in a large group
of “low-cost leader” hospitals and smaller group of “differentiation strategy” hospitals
(Marlin et al., 2002).
RBV on the other hand, although utilized parallel to RDT as part of the strategic
planning process, is relatively a newer discipline within the strategic planning
 and management framework (Newbert, 2007; Priem and Butler, 2001), and is not well- Healthcare
established or tested within healthcare strategic planning. Nonetheless, the application strategic
of the RBV to strategic management has been rapidly growing and diffused into the
strategy literature starting. The RBV’s focus is on competitive advantage based in management
internal resources an organization develops or hires in order to implement specific
product market strategies (Priem and Butler, 2001; Wernerfelt, 1984), and more
recently has been applied to healthcare settings in order to compare resources vs 253
resource deployment capabilities during specialty surgeries (Huesch, 2013). With this
perspective on unique internal resources needed to implement strategy, the RBV has
been used in the fields of strategic management, human resources management
and information technology strategic planning (Barney and Clark, 2007; Mahoney and
Pandian, 1992; Noda and Bower, 1996; Wade and Hulland, 2004).
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The problem
Looking across the US healthcare sector, one can easily detect common strategic
initiatives shared among hospitals, including process re-engineering, care
coordination, horizontal integration, electronic medical records (EMR), culture
change, quality improvement, and physician engagement, among others. All seem to
be driven by the need to prepare for future environmental changes associated
with healthcare reform, and are often embedded within an organization-wide strategic
plan (Vest and Gamm, 2009). An external orientation predicts firm behavior based
on external environmental changes, constraints, and benchmarks, which can result in
similar strategic decisions and initiatives across healthcare organizations due to
the common external forces experienced (Marlin et al., 2002). Intuitively, the hospital
sector is expected to be highly externally oriented as it faces a rapidly changing
and demanding environment of regulation and payment changes. However, it is clear
that different organizations perform at different levels, thus prompting the question:
do external or internal environmental considerations primarily drive strategy
formulation? Further, if internal resource coordination and deployment does differ
across hospitals, how does the allocation of certain internal productive resource
capabilities play a role in defining the strategic management framework?
This study of two large health systems is geared toward improving our
understanding of the strategic decision process, strategic initiatives, and management
behavior related to strategy implementation in hospitals. To do this, we rely upon
healthcare leaders’ assessments of their organizations’ strategic initiatives. We seek to
identify similarities and differences among strategic initiatives across the two health
systems based on how the initiatives are identified and described. Further, this study
allows for the evaluation of rankings of initiatives, managers’ time consumption,
and number of key managers involved in each strategic initiative. We facilitate this
analysis by grouping strategic initiatives, similar in nature and focus, and comparing
results between the two very different systems. In addition, we try to understand
the importance of the external vs internal environmental considerations in formulating
strategy. To improve our understanding of the nature of strategic initiatives within
health systems we focussed on the following three research questions:

RQ1. Are the nature and focus of the strategic initiatives among the two health
systems highly similar or different?

RQ2. Was strategy driven by internal and/or external environmental forces?

 JSMA RQ3. How do the two systems differ in allocating internal resources (time and key
7,3 managers) to strategic initiatives and groups of similar initiatives?

Results will provide an enhanced conceptual and empirical base for understanding the
nature of strategic management in healthcare and the balance between external and
internal resource considerations.
254
Methods
This paper uses comparative case study design to describe, categorize and compare
the strategic initiatives within two large, metropolitan healthcare systems (Yin, 2010;
Anaf et al., 2007). In-person semi-structured interviews were conducted with top-level
healthcare leaders and administrators within these two settings during 2009. Summary
statistics and qualitative content analysis were employed to identify characteristics
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of the strategic change initiatives as identified and described by interviewees.

To facilitate the cross-case comparative analysis the research team used content-analytic
summary tables capturing information about strategic initiatives identified and
described by interviewees (Miles and Huberman, 2010).

Setting
The two health systems participating in this study are located in different urban
markets within one state. Table I includes an organizational profile for both health
systems. The Children’s Health System is located in a large metropolitan area that is
highly concentrated with healthcare providers and competing hospital systems.

The Children’s Health The Multi-Hospital

System System

System integration Vertical Horizontal

Market area Large urban 1 Large urban 2
Number of hospitals in the system 2 25
Number of beds (licensed) 612 3,800
Number of employees 5,540 22,500
Mean Census 2011 380 2,163
Study sample size 32 29
Male (% of total at each system) 50 57
Clinician (% of total at each system) 34 23
Average tenure at health system (years) 10 11
Average healthcare management experience
(years) 16 24
Highest level of education – cumulative (% at each system)
Associates degree 3 0
Bachelors 25 13
Masters 56 60
PhD/Doctor 16 27
Position level (% at each system)
Executive Vice President/President 6 36
Senior Vice President 24 27
Vice President 19 30
Table I. Associate Vice President 3 0
Health system and Director/Chief/MD 45 7
interviewee profiles Assistant Director 3 0
 This health system is vertically integrated through a strong primary provider network Healthcare
and in the process of further vertical integration into women’s health services. strategic
Interview participants included executive leadership, vice presidents, and
administrators. The second health system is a horizontally integrated multi-hospital management
system (25 acute-care hospitals) spread over a geographically large metropolitan
and sub-urban market. The Multi-Hospital Health System’s market can also be
characterized by intense competition among hospitals and healthcare providers. The 255
study participants worked at the system’s corporate office and were responsible for the
overall direction, operation, and financial health of the system.

Data collection and participants

The semi-structured interviews were conducted as focussed, open-ended discussions
which prompted the participants to provide more structured discussion around
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elements concerning nature of strategic initiatives as well as rating and ranking of

initiatives (Blumer, 1969; Bogdan and Biklen, 1992). Before interviews commenced,
meetings with several top leaders of each organization were conducted in order to
identify, name and define a set of current strategic initiatives. In the case of the
Children’s Health System, a number of discrete projects were identified. In the case
of the Multi-Hospital System, the leaders pointed to five major overarching initiatives
associated with a broad organizational strategic plan. During these meetings,
standardized open-ended questions were developed and agreed upon. These
standardized questions help reduce biases associated with variance in interviews by
different researchers as well as biases associated with leading or prompting (Patton,
1990). Study participants’ responses also generated answers to questions relating to:
time and effort spent on each initiative and prioritization of strategic initiatives. Each
participant was also allowed additional time to provide related information that the
questions did not probe.
In all, 61 interviews (32 interviews at the Children’s Health System and 29
interviews at the Multi-Hospital System) were conducted by four researchers, all of
whom were involved in the interview development process. At both organizations,
the research team used a combined positional and snowball sample approach which
started with the senior executive team and progressed down the organizational
hierarchy as interviewees identified other key participants with initiatives. When
no new individuals were identified we concluded the interview process (Biernacki and
Waldorf, 1981).

Analytical approach
For this study, we focussed on results from four interview questions:
(1) identification and description of strategic initiatives (open ended question);
(2) the number of key managers engaged in each strategic initiative;
(3) percentage time spent on each strategic initiative (as self-reported by the
interviewees); and
(4) ranking of initiatives in terms of how mission critical they are to the system.
Although the classic view of RBV includes people, capabilities and financial resources,
we did not focus on financial resources allocated to strategic initiatives identified in
the two systems, assuming that financial resources have been made available by top
 JSMA management to allow successful implementation. Further, the RBV perspective places
7,3 increased attention on the development of “dynamic capabilities” and “productive
resources” as potential sources of competitive advantage (Penrose, 1959). The research
team focussed great attention on these aspects of the RBV perspective when analyzing
descriptive statistics and qualitative data describing strategic initiatives.
Results center around the qualitative, descriptive nature of the first question,
256 assuring that the respondents agree on the number and nature of each initiative
identified. We approached the results of the administrators’ interviews with the
purpose of understanding the nature of each strategic initiative. Similarities and
differences were identified based on how alike the assigned title, purpose and
descriptions of the initiatives were across the two health systems using
content-analytic summary tables. Coding of the interview transcripts was performed
by teams of two researchers with the addition of a third independent coder who
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validated the coding and helped in situations when the first two coders disagreed.

Findings
The 61 interview participants in the two health systems had between 1 and 41 years of
healthcare experience, had been at their current organization between six months to 39
years, and included 19 physicians (physician administrators and clinicians). The
interviewees were split equally in terms of gender: 29 females and 32 males. At the
Children’s Health System the majority of the interviewees held positions of Director/Chief/
MD, Vice President or Senior Vice President. The Multi-Hospital Health Systems
interviewees mostly held positions of Executive Vice President/President, Senior Vice
President, or Vice President. A complete profile of the interviewees and the two health
systems is presented in Table I. Detailed discussion of key staff members and leaders as
sources of “distinctive competencies” follows in the discussion of results linked to the
implementation of strategic initiatives. In general, we considered organizational capabilities
that are distinctive enough such that they might confer competitive advantage to the firm
as “distinctive competencies” and explained them as such (Wernerfelt, 1984).
Results by health system – the children’s health system
This organization was pursuing eight strategic initiatives including:
(1) an inpatient quality and patient safety program;
(2) a medical education consolidation initiative which included the restructuring
and formalization of the relationship with a medical school in order to ensure a
continuing supply of medical providers;
(3) implementation and integration of a new EMR (EPIC);
(4) a culture of Cost Containment initiative to better manage utilization of
resources;
(5) a new clinical building to house an innovative program and a satellite hospital
to support a new clinical program initiative;
(6) various coordinated patient flow improvement initiatives across the system;
(7) a research center involving large investments in research initiatives and a new
research building; and
(8) launching of a physician service organization to serve as a hospital-based
billing and collecting service for contracted physicians’ professional fees.
 The multi-hospital health system Healthcare
At the time of the study, five initiatives designed to transform its 25 hospitals were strategic
being pursued as part of the system strategic plan, each associated with specific goals
to meet over the next five to ten years. These initiatives included: management
(1) a quality and safety initiative, which focusses on reducing medical errors;
(2) a culture change initiative, including application to the Malcolm Baldrige 257
National Quality Award program;
(3) a physician engagement initiative, through which the health system desires to
advance physician alignment with the organization;
(4) a cost-effectiveness initiative which is intended to help the organization to
more effectively manage resources; and
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(5) a provider and coordinator of care initiative which is designed to align and
integrate patient care and coordination throughout the system.
A total of 13 strategic initiatives were identified across the two health systems.
The Multi-Hospital Health System did not identify any building projects. Results
presented in Table II list each initiative identified in the two settings and present the
number of key managers engaged in each strategic change initiative, average time spent
on transformations, and the average rating of the transformation by respondents in
terms of how mission critical they perceive the transformation to be for the organization.
The number of key managers the Children’s Health System had engaged in its eight
strategic change initiatives ranged from 11 to 34 members (including administrators
and managers at many levels of the organizations). The Patient Flow initiative had the
fewest key personnel engaged, while the culture initiative, which spanned across

Mission critical Number of

priority Time consumption key personnel
Average Final Average time Final involved
Strategic planning initiative rank rank consumed rank Count

The Children’s Health System

1. Quality/patient safety 2.6 1 17.5 2 21
2. Medical consolidation 2.9 2 5.5 8 21
3. EPIC – IT implementation 3.7 3 15.3 3 28
4. Culture/cost containment 3.7 3 25.7 1 34
5. Building project – new clinical
program 4.8 5 14.1 4 28
6. Patient flow 5.1 7 7 7 11
7. Building project – new research
center 5.1 7 10.3 6 25
8. Physician services
organization 4.9 6 12.8 5 24
The Multi-Hospital Health System
1. Quality 2.1 1 17.5 3 13
2. Culture 2.3 2 23.8 1 16
3. Physician engagement 2.7 3 20.6 2 14
4. Cost-effectiveness 3.4 4 17.1 4 15 Table II.
5. Provider and coordinator of Interview results
care 3.6 5 14.07 5 12 by health system
 JSMA the entire organization and had to be transplanted to the new hospital site, occupied
7,3 the largest number of administrators. The organizational structure, including the
strategy implementation approach, at the Children’s Health System followed a highly
decentralized coordination approach and predominantly divisional organization,
allowing for multiple bundles of key managers to form around initiatives as well as by
location and service lines. This organic formation of multiple bundles of key resources
258 by initiative and location was identified as a distinctive capability at the Children’s
Health System.
The Multi-Hospital System, in contrast, relied on fewer key administrative
personnel for each of their five initiatives as can be seen from the last column in
Table II. The Multi-Hospital System engaged anywhere between 12 and 16 key
personnel in its five major initiatives. Strategic decision making and implementation
approach across the 25 hospitals within this system can be described as highly
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centralized and standardized. Interviewees demonstrated this coordinated resource

allocation capability by providing very consistent descriptions of initiatives and by
using “script-like” language in these descriptions. This highly coordinated and
standardized resource and talent allocation approach was facilitated by the matrix
type organizational structure of the system. This system also provided us an example
of “distinctive competence” where institutional leaders created purpose by organizing
the structure of strategy implementation with focussed mission (Selznick, 1957).
The interviewees were asked about the percentage of time they estimated to have
spent on each initiative during the last six to 12 months. This time consumption
measure is based on a self-reported time estimate and provides indication as to the
human capital usage for the initiatives. In both health systems, the initiatives that rank
lowest on mission criticality also rank lowest in terms of average percentage of leaders’
time consumed. Table II shows that the Cost Containment initiative is consuming the
greatest amount of time followed by the Quality/Patient Safety initiative, and the EMR
implementations at the Children’s Health System. The top three most time consuming
strategic initiatives at the Multi-Hospital System were the Culture Change initiative,
followed by the Physician Engagement initiative, and Quality/Patient Safety (Table II).
Quality and Culture initiatives were the top two most time consuming initiatives for
both organizations studied, reinforcing the perspective that highly mission critical
initiatives are most likely driven by external forces (RDT), and therefore, very similar
across hospitals. Despite clear similarities across the two hospitals in terms of nature
of strategic initiatives, the systems deployed and organized key resources differently to
achieve sustainable implementation results. Differences in resource deployment were
associated not only with differences in organizational structure, as discussed before,
but also due to availability of key management time and the unique administrative
network that links and coordinated bundles of such key resources (Penrose, 1959).
Finally, the administrators at the Children’s Health System ranked the top three
most mission critical initiatives as follows: Quality/Patient Safety; Medical
Consolidation; and EMR (EPIC-IT). At the Multi-Hospital System the Quality
initiative was ranked first, followed by Culture, and Physician Engagement. It is
important to mention that many administrators were engaged as key personnel in
multiple transformative initiatives; this was true for both organizations.

Comparative results
Table III illustrates how the research team grouped the strategic initiatives together
based on observed similarities in focus and nature of the initiatives. There are clearly
 Mission Number of key
Healthcare
Average critical personnel strategic
Organization Initiative % time rank involved management
Health System Quality 17.5 1 13
Children’s
Hospital Quality/patient safety 17.5 1 21 259
Health System Physician engagement 20.6 3 14
Children’s Physician services
Hospital organization 12.8 6 24
Health System Cost-effectiveness 17.1 4 15 Table III.
Children’s Comparison of strategic
Hospital Culture/cost containment 25.7 3 34 initiative groups by
Health System Culture 23.8 2 16 health system
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more similarities than differences between the two health systems when examining
their strategic initiatives. The system leaders even use similar titles and names for the
initiatives that are similar in nature. We found that seven out of 13 initiatives identified
clearly fell into three common groups of strategic initiatives across health systems.
Both health systems seem to be engaged in initiatives driven by external requirements
and industry standards for quality and patient safety, expected reimbursement
changes that will require a closer partnership with physicians, and the need for cost
containment.
Strategic initiatives that were identified as similar across the two systems were
grouped together and compared within each of three strategic initiative groups. The
three resulting strategic initiative groupings are: Quality and Quality/Patient Safety;
Physician Engagement and the PSO; and culture and Cost Containment (Table III). The
strategic initiatives that did not group are the two building and the medical
consolidation projects within the Children’s Hospital System and the Provider and
Coordinator of Care initiative pursued by the Multi-Hospital System. Based on
respondents’ descriptions, the building projects were related to further vertical
integration of the Children’s Health System driven partly by mission and scientific
advances that make women’s health services an extension of pediatric specialties;
while the Provider and Coordinator of Care initiative was an opportunity for the
Multi-Hospital System to leverage its horizontally integrated system to benefit from
future population health based models of reimbursement. It is important to note that
the Multi-Hospital System’s Provider and Coordinator of Care initiative is very similar
to the well-established and integrated primary care provider network at the Children’s
Health System. Both systems demonstrate significant attention in strategy to ensuring
responsiveness to a changing external resource environment. In both, finance related
initiatives and physician engagement initiatives are clearly connected to the external
resource considerations and demands linked to healthcare reform, which is aligned
with the RDT point of view. The quality and culture initiatives were driven by both
RDT (via value-based purchasing and patient satisfaction reporting requirements)
and internal resource capabilities and allocation considerations in both health
systems. The building of a maternity center at the Children’s Health System and a new
research institute was also driven by a combination of external and internal resource
considerations.
 JSMA Research limitations
7,3 This study has two general research limitations. First, the results of this comparative
study are based on only two settings, although both systems were multi-hospital
systems operating in highly competitive market areas. Second, this study did not
consider financial resources allocated to implement strategy by measuring actual
dollar amounts. However, the RBV related elements studied include number of key
260 managers, time consumption, and the combination and coordination of these human
resources and capabilities, which do indirectly address some financial considerations.
We hope to expand this work in progress in future multi-site study by applying
additional elements of the RBV framework.

Discussion
The results from the comparative case study, combined with our review of RDT and
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RBV literature, indicates a strong influence of RDT in healthcare strategic decision

making. We also observed variations in strategy implementation approach related to
resource coordination and allocation, which supports the conclusion that RBV is most
relevant to hospitals when engaged in implementation of mostly externally driven
strategic initiatives. This helped us develop a conceptual framework for healthcare
strategic management that incorporates and balances both theoretical approaches
(Eisenhardt and Zbaracki, 1992; Nemati et al., 2010; Friday-Stroud and Sutterfield,
2007). This conceptual framework, as depicted in Figure 1, illustrates important
external and internal perspectives and analytical steps that need to be part of today’s
healthcare strategic decision-making and management process. The conceptual
framework starts with the situation analysis stage, which ideally should include
both RDT and RBV perspectives. The framework incorporates the strategy
implementation step that links resource allocation back to the RBV perspective as
suggested by the comparative case study results. We believe that as RBV gains
importance in strategy implementation within healthcare organizations (and other
firms faced with a dynamic external environment of regulation and competition),
it will gradually become part of the earlier stages of the strategic planning process.

External Environment: Highly Regulated

Resource Dependency

RDT

Scarcity of Resources
Multiple
Strategic
Strategic Strategic Initiatives
Alternatives Decision &
Implementation
Planning
Capital Resources
RBV
Figure 1.
Strategic decision-making
Human Resources External Environment: Highly Competitive
framework – role of RDT
and RBV in the strategic
management process Allocation of key Staff and Talent
 Investment in and deployment of key management resources and talent to effectively Healthcare
implement strategy will over time build larger organizational capacity designed to take strategic
advantage of external environmental challenges requiring industry wide quality and
efficiency gains (Kash et al., 2013) management
Contribution to knowledge and theory
Based on our results and the proposed healthcare strategic management framework, 261
healthcare systems generally take on an external environmental perspective in order
to establish strategic choice and, as a result, develop similar strategic initiatives.
This process is theoretically driven by the RDT components of a highly regulated and
uncertain external environment that hospitals are facing today. The internal perspective
is not as prevalent in strategic decision making, but plays a greater role in the
implementation phase, through offering key human resources and organizational capacity
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building functions which are foundational in the development of future strategies.

Therefore, we suggest that in today’s healthcare environment of heightened
regulation and market competition, the two perspectives (as presented in
Figure 1) – external (supported by RDT when evaluating the external environment)
and internal (supported by RBV) – are compatible and necessary in the healthcare
strategic management process. Based on the two healthcare systems studied, strategy
development seems to be primarily driven by external environmental constraints,
while strategy implementation has the ability to strengthen the RBV perspective as
healthcare organizations give considerable attention to how to develop and deploy
talents and capabilities needed to carry the strategic initiatives. Our model of strategic
decision making in healthcare presents the application of RDT and RBV as separate
and compatible activities that are often sequential today.
We infer from the results of this study that the relevance of the RBV perspective
becomes apparent as the healthcare strategist examines internal resources when
pursuing strategic initiatives driven by the constraints of a highly regulated external
environment. These results confirm the overarching RDT argument that organizations
respond and react to environmental condition by using internal resources to manage
and respond to an external dependence (Pfeffer and Salancik, 1978). Therefore, the
deployment of specific combinations of relevant internal resources to achieve
strategic goals in the implementation of often similar strategic initiatives across
healthcare systems can eventually lead to the identification of competitive advantages
within the health system as more attention is given to the relevance of the RBV. These
observed differences in human resources deployment in implementing similar strategic
initiatives supports the notion that strategy making in healthcare organizations
is often embedded in an internal process of resource allocation and deployment
(Noda and Bower, 1996), suggesting that decisions concerning development and
deployment of key management resources and talent will eventually drive strategic
decision making and define competitive advantages in the hospital sector.

Practice implications
Healthcare strategic planning conversations are often centered on shared external
uncertainties faced by all US hospitals, including health care reform, specific
reimbursement and program spending cuts, and other payment incentives. Solutions
to these uncertainties often result in similar strategic decisions, indicating that
today’s healthcare organization are often first focussed on external environmental
requirements (Swayne et al., 2006).
 JSMA A compliment to this external view in the early stages of the strategic planning
7,3 process (the situation analysis stage) is the RBV, which takes an internal orientation
by systematically evaluating relevant organizational resources, which could present
potential competitive advantages. The RBV indicates that organizations should
focus on combinations of rare resources that promote an organization’s competitive
advantage (Newbert, 2008). It is of particular interest to the healthcare strategic
262 planning and decision making process as it helps organizations identify “distinctive
competencies” in a highly innovation-driven market often expected to be disrupted
by low cost-high value substitutes to traditional medical care models (Wernerfelt,
1984). When healthcare organizations combine the internal RBV perspective with
relevant external environmental factors, they are able to develop differentiation and/or
diversification strategies focussing the organization on specific markets or specialty
services (Mahoney and Pandian, 1992). In an ever evolving, and complex healthcare
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market, driven by changing government payment systems, regulation demands,

challenging trends in population health, as well as increased market competition and
disruptive innovations; the RBV is expected to become more relevant to healthcare
strategic management (Christensen et al., 2009; Zimlichman and Levin-Scherz, 2013;
Peteraf, 2006; Newbert, 2007; Wessel and Christensen, 2012; Gilbert et al., 2012), and
now reinforced in this refined framework for healthcare strategic management. The
refined strategic management framework is relevant to the healthcare sector and other
sectors faced with dynamic competitive market forces as well as a highly constraining
and constantly changing regulatory environment.

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About the authors

Dr Bita Arbab Kash is an Assistant Professor at the Department of Health Policy Management at
the Texas A&M Health Science Center. Her areas of research include organizational capacity for
change and transformation, strategic management, and nursing home staffing and turnover.
Her most recent project, funded by NSF’s Center for Health Organization Transformation, examines
elements of an integrated primary care provider network as sources of competitive advantage by
applying resource based theory. Dr Bita Arbab Kash is the corresponding author and can be
contacted at: bakash@srph.tamhsc.edu
Dr Aaron Spaulding is an Assistant Professor in the Department of Public Health (Health
Administration program) at the University of North Florida. His research focus includes:
organization theory, organization behavior, and strategic management.
Dr Larry D. Gamm, PhD is the Director of the NSF-supported Center for Health Organization
Transformation and Regents Professor in the Department of Health Policy and Management at
the Texas A&M Health Science Center. Dr Gamm’s research and teaching interests have focussed
primarily on leadership, key technologies, and change in healthcare organizations. He has led
research and published for many years on electronic medical record implementation (more
recently on Health Information Exchange), chronic disease management, organization change,
primary care and medical homes, community health partnerships, and rural health. In addition
to teaching doctoral courses on management of organizational innovation and interorganizational
research, he teaches the MHA capstone course titled Health Systems Leadership.
Dr Christopher E. Johnson is an Associate Professor, Director, Programs in Health Services
Administration and the Austin Ross Chair in Health Administration in the Department of
Health Services at the University of Washington. He specializes in work that seeks to understand
how health care organizations and communities impact health care outcomes for the elderly,
under-served populations, and Veterans.

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