Benefits of Adaptive Capability on the Performance of US Long-term Healthcare Providers

Medicaid programs experienced funding shortfalls for nursing facility care by $6.3 billion in 2011. Such financial challenges have forced the U.S. long-term healthcare industry to search for strategies to improve operational... [ view full abstract ]

Medicaid programs experienced funding shortfalls for nursing facility care by $6.3 billion in 2011. Such financial challenges have forced the U.S. long-term healthcare industry to search for strategies to improve operational efficiency while facing ever-increasing expenses. Over the past two decades, research on skilled nursing facility has focused on quality performance (Davis, 1991; Lenard & Shimshak, 2009) and reduced deficiencies (Castle & Ferguson, 2010). Limited research has examined U.S. long-term care facilities with regard to capability dimensions, and operational performance of SNFs. Due to heavy dependence on external funding sources such as Medicare and Medicaid, SNF providers tend to apply various strategies to pursue available opportunities via adaptive processes, such as collecting, monitoring, predicting, and adapting competitors’ actions (Cohen & Levinthal, 1990; Lenox & King, 2004). Adaptive capability involves a firm’s strategic flexibility to adapt, align and shift its available resources through continual changes in products and services to respond to external opportunities. Outcomes in healthcare can be measured from clinical results; patient/resident satisfaction (Meyer, 1998); and patient knowledge, attitudes and behaviors (Donabedian, 1982). Some empirical studies (Bourgeois, 1980; Wang & Wang, 2008) have implemented a combination of adaptive capabilities and operationalized adaptive capability (i.e., the ability to predict and adapt to the changing market demand and competitors’ actions) to determine that firms with high adaptive capability will achieve higher performance. When firms operate with high adaptive capability in more turbulent environments, greater market growth is achieved compared to firms with lower adaptability.We maintain that a healthcare provider’s ability to predict and adapt to changing market demand and competitors’ actions will affect its performance.