A Race to the Top? Competitive Pressure and Magnet Adoption Among US Hospitals 1997 – 2012

Care quality continues to be a focal point within the US health care system in an effort to deliver high value services while simultaneously containing costs. Advancements in this area include new financial incentives for providers as well as innovative models for care delivery. An example of a quality-driven initiative with a long history, but recently growing popularity, is Magnet hospital recognition. The Magnet hospital concept emerged in the 1980s in the midst of a national nursing shortage. Recognizing that some hospitals were better able to recruit and retain nurses, researchers described these hospitals as having “magnet-like” properties. By 1994, the American Nurse Credentialing Center (ANCC) formally established the Magnet Recognition Program as a nurse-driven initiative emphasizing care quality and patient safety.

A large literature now links Magnet hospitals with better outcomes for patients and nursing staff. For these reasons, hospitals could presumably use Magnet status as a quality signal to compete within two related markets: 1) the market for nursing labor and 2) the market for patients. However, Magnet recognition is not a costless signal, so hospitals are likely to weigh the certain investment costs against the uncertain future payoffs, which can depend on prevailing market conditions. Surprisingly, no studies have explored if and how hospitals’ local market environment shapes their pursuit of Magnet status. This study utilizes detailed longitudinal data to examine how hospital competition contributes to Magnet adoption. 

Using American Hospital Association annual surveys from 1997-2012, we estimate hospital-level fixed effect regressions to capture the relationship between competitors’ adoption behavior and a given hospital’s likelihood of becoming a Magnet over time. We also enrich our analyses by exploring heterogeneity according to a hospital’s local market power and examining adoption behavior when the level of competition changes – irrespective of Magnet penetration.

We show that the number of Magnets is increasing in the US, but their distribution is highly uneven. Having more competitors become Magnets strongly predicts that a given hospital seeks Magnet recognition as well. We also see some forecasting behavior on the part of hospitals. However, a hospital’s relative position in the market and the intensity of competition seem to be important moderating influences.  

Overall, we find evidence that market competition motivates hospitals to pursue Magnet recognition, which has implications for empirical studies considering the underlying selection mechanisms into Magnet status. Additionally, our results are relevant to policy interests in greater diffusion of care quality initiatives. As more attention is given to promoting population health and health system performance, policymakers and advocates will have to bear in mind the roles of economic factors in whether or not institutions invest in costly innovations. Market forces can ultimately accelerate or attenuate the adoption process in different settings.