Abstract

Advances in medical technology have altered the need for certain types of surgery to be performed in traditional inpatient hospital settings. Less invasive surgical procedures allow a growing number of medical treatments to take place on an outpatient basis. Hospitals face growing competition from ambulatory surgery centers (ASCs) that utilize innovative technology. The competitive threats posed by ASCs are important, given that inpatient surgery has been the cornerstone of hospital services for over a century. Disruptive innovation is heralded as a way to lower the costs of health care services, while improving the quality of and accessibility to care. Yet, regulations that aim to control the effects of disruptive innovation in the hospital industry can limit access and keep costs high. Understanding better surgical volume shifts between acute care general hospitals (ACGHs) and ASCs and the impact of regulation on surgical volume is important to informing public and health policy debates. The main purposes of this study are to: (1) examine the effects of disruptive innovation in the health care industry, and (2) assess the effects of disruptive innovation and public policy reforms on ambulatory laparoscopic appendectomy and cholecystectomy (ALAC) procedures. This study examines claims of disruptive innovation theory in the provision of ALAC and examines the affects of Centers for Medicare and Medicaid (CMS) coverage determinations and reimbursement payment rate decisions on ALAC procedure volumes. Study findings support the claims of Christensen and associates who contend that regulation stifles disruptive innovation. Findings show that disruptive innovation and regulatory interventions contribute to organizational changes in the hospital industry and alter the trajectory of ALAC surgical volume. This research is theoretically significant because it places disruptive innovation theory within an organization theory framework to elucidate competitive dynamics in the health care industry. The interdisciplinary work features a business management theory that is contextualized in organizational theory and applied to the health care industry with public policy implications. The research is significant because of its interdisciplinary and multi-level analytical approaches to examining change in the hospital industry.