The American hospital industry has undergone significant changes in its
organization and competitive structure over the past few years. The rise of managed care,
the change in reimbursement systems from cost based to fixed fee for Medicare patients,
and the increasing substitution of outpatient services for traditional inpatient procedures
have placed tremendous financial pressure on the nation’s hospitals. Hospitals have
responded to these changes by searching for new ways to lower their costs and increase
revenues (Gilbert, 1995).