The question of whether Hospital Corporation of America (HCA), a for-profit hospital company, fostered an environment detrimental to the physician-patient relationship during the period of implementation of the Medicare Prospective Payment System (PPS) was explored. The transition to PPS provided an opportunity to evaluate whether hospital ownership differences affected responses to a payment system which encouraged institutional intervention in the practice of medicine. A case study approach was used to observe the influence of the then largest for-profit hospital corporation upon physicians' medical practice in four owned hospitals. Findings indicated that HCA hospital managers were most directly influenced by the local competitive environment and their own personal agendas in responding to PPS incentives. Corporate influence actually softened payment system incentives to intervene in medical practice by providing a generous supply of capital, and by fostering a corporate culture conducive to cooperative relationships with physicians. Better public understanding of the determinants of hospital behavior is needed to preserve or enhance important social goals such as the physician-patient relationship; easily measurable characteristics such as ownership or bed size explain little about hospital behavior or motivation.

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