A theory of organizational response to regulation: the case of hospitals.

This paper presents a general theory of organizational response to regulation, a theory that integrates adaptation and mutual selection perspectives. Two major forms of regulation in the hospital industry, certificate of need and rate review, are examined. Hypotheses are derived concerning the nature and timing of the various adjustments hospitals make both in internal organizational arrangements and in patterns of interorganizational activity in the face of regulatory constraints. Suggestions and data sources for testing the theory are presented.