J Med Internet Res 2021 Aug 16;23(8):e30453 [, Vallabhajosyula S, Patlolla SH, Dunlay SM, Prasad A, Bell MR, Jaffe AS, et al. [. Beyond the recent disruptions due to COVID-19, health systems have been facing at least three types of competitive threats over the last decade, driving integrations more than ever before. bTDDC: technology disruptiondriven competition. Unfortunately, evidence is accumulating that health care consolidation is harming competition in the U.S. health care market, while neither reducing costs nor improving care.
Information, resources, and support needed to approach rotations - and life as a resident. The mergers of GigCapital2, UpHealth, and Cloudbreak Health as a unified telemedicine solution provider, and Teladocs acquisitions of several other technology-enabled models such as Livongo and InTouch Health, exemplify the competition and subsequent mergers due to technological imperatives [6]. Ambulatory surgery centers compete with hospitals for patients. At the state level, laws and regulations, and the mix of providers and insurers, make markets in each state vastly different [36].
The aggregate number of outpatient cases or procedures per case did not increase.
However, technology disruption may hinder integrations. More specifically, the results suggest that health systems with higher EEUC perceptions tend to choose vertical integration plans.
Although the researchers did not look at quality data for this study, it is hard to argue that the changes are improving quality since imaging and lab tests are highly standardized across providers. Health Care Manag 2007;26(2):116-127. eCSDC: customer servicedriven competition. However, overly integrated markets may lead to monopolistic entities and behavior, and that potential needs to be carefully managed and avoided with policy-level interventions. [, Competition and Integration of US Health Systems in the Post-COVID-19 New Normal: Cross-sectional Survey, JMIR Theme Issue: COVID-19 Special Issue (1695), Theme Issue: Novel Coronavirus (COVID-19) Outbreak Rapid Reports (1206), Outbreak and Pandemic Preparedness and Management (1266), Vol 6, No Subscribe to the weekly Policy Currents newsletter to receive updates on the issues that matter most. They examined claims for five common diagnostic imaging procedures and five common laboratory tests to determine whether being a part of a vertically integrated group caused primary care physicians to change the site where their patients received common diagnostic tests.
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The 135 health systems represented in this survey varied from 1 to 18 hospitals with 176 to 75,000 employees.
aSee Table 2 for a description of variable codes. Health systems integration: state of the evidence. aThe number of physicians and hospitals are presented in this table in different categories for easy comparison across respondents and nonrespondents. Future studies are planned to collect and use multiple years of data from health systems to address this limitation and provide causal inferences. The four values were close to or greater than the recommended acceptable threshold of .70 for exploratory research. The second objective of this study was to examine how these three types of competition perceptions influence vertical and horizontal integrations of US health systems in the post-COVID-19 new normal.
cAll questions are measured using a 7-point Likert scale; 1=strongly disagree to 7=strongly agree. Three size variables measure the number of beds across a health system (SIZE_B-SMALL, SIZE_B-MEDIUM, and SIZE_B-LARGE), four region variables reflect the location of a health system (REGION-NE, REGION-MW, REGION-SOUTH, and REGION-WEST), three teaching statusrelated variables assess the extent to which a health system is associated with a teaching program (TEACHING-NON, TEACHING-MINOR, and TEACHING-MAJOR).
The outcome of vertical integration when facing customer servicedriven competition comes through the one-stop shop service to achieve cost leadership [10].
Regional variation in the management and outcomes of acute myocardial infarction with cardiogenic shock in the United States. Recent studies have shown that hospital M&As are associated with decreased patient experience measures, along with no evidence of quality improvement with the change in ownership of health entities [20]. In other words, external environment uncertainty is considered at the health-system level. (r->M+v+{UuP0JzDQC4R. b&rv;'SpNi". [, Stakov P, Papadaki , Dvorsk J.
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Impacts of health care industry consolidation in Pittsburgh, Pennsylvania: a qualitative study. Integration and collaboration in public health--a conceptual framework.
Decision Support Systems 2016 Jun;86:73-82. Health Aff (Millwood) 2020 Aug;39(8):1302-1311 [, Donato R. Extending transaction cost economics: towards a synthesised approach for analysing contracting in health care markets with experience from the Australian private sector. Cutler, David, Leemore S. Dafny, David Grabowski, Steven S. Lee, and Christopher Ody.
*/+C]|3I.!VVL,}'.NU -d:5lk%XF90mtv@30:x_[7BL8\kv. Second, compared with nonteaching health systems, major teaching health systems perceive less EEUC and CSDC. The Climate Study aims to understand the current state of health systems in the United States following the COVID-19 pandemic. Health Aff (Millwood) 2017 Sep 01;36(9):1530-1538. We examined (1) how health system characteristics help discern competition perceptions and integration decisions, and (2) how environment-, technology-, and service-driven competition aspects influence vertical and horizontal integration among US health systems in the post-COVID-19 new normal. Physicians not employed by a hospital or health system or part of a vertically integrated group accounted for 85 percent of the increased use of outpatient settings. Frances J Mejia, Graduate Fellow at HARC, helped in collecting relevant prior research. Environment uncertaintyrelated competition is a significant factor, with underlying contingent factors such as revenue concerns and leadership as the leading causes of integration plans. A total of 148 responses from the 624 CEOs contacted, representing a 23.7% response rate, out of which 13 incomplete responses could not be used, leaving 135 final usable responses. Health Aff (Millwood) 2012 May;31(5):1092-1099. Alexander JA, Burns LR, Morrisey MA, Johnson V. CEO perceptions of competition--and strategic response in hospital markets. With respect to health care consolidation, the agencies focuses on protecting health care consumers by promoting competition.
The COVID-19 pandemic may have exacerbated integration plans. The Clayton Act prohibits combinations that substantially lessen competition; few empirical studies have focused on whether this is the source of harm from vertical combinations. We found that the EEUC perception is influential on both vertical and horizontal integration plans. The results suggest the following. First, this study sheds light on the influence of the characteristics of health systems on competition perceptions.
Plausibly, rather than acquiring firms, they may be focusing on developing in-house expertise. Even without intent to gain leverage with payers, if the effect of vertical integration is higher prices associated with shifting sites of care, competition (which should be based on quality and price) could be negatively affected. We find no evidence that increased self-referrals improve patient outcomes or change post-discharge Medicare spending.
Advanced information technologies such as cloud computing can significantly change the operation efficiency and cost, thus changing the economic paradigm and the relationship between collaborative parties [23]. The researchers examined changes in outpatient surgical trends and case mix for Medicare and privately insured patients needing total knee replacement following a specific change in Medicare policy.
URL: Han PKJ, Babrow A, Hillen MA, Gulbrandsen P, Smets EM, Ofstad EH. Health Systems Climate Study Report. The results of the basic regression model, as well as the regression with first-order interaction terms, were statistically significant. Health care|Oncology|Public health|Economic theory, Murdock, Sandra Dismer, "Evaluating the impact of vertical integration on health system peformance" (2001). The studies summarized here suggest that vertical integration is affecting the site of care and both Medicare and private sector spending. The survey questionnaire was revised and finalized in January 2021. Exploiting a plausibly exogenous shock to Medicare reimbursement for SNFs, we find that a 1 percent increase in a patients expected profitability to a SNF increases the probability that a hospital self-refers that patient (i.e., to a co-owned SNF) by 2.5 percent. While uncertainty remains about the drivers of organizational changes, these changes have led to health care organizations becoming more extensive and more financially integrated [21]. In other words, the needs of exchanging hazard in the external environment uncertaintyrelevant competition results in integration, the efforts of improving transaction efficiency in the technology disruptiondriven competition lead to integration, and the strategy of cost leadership in the customer servicedriven competition causes integration. [, Schniederjans DG, Hales DN. bEEUC: environment uncertaintyrelated competition. /content/admin/rand-header/jcr:content/par/header/reports, /content/admin/rand-header/jcr:content/par/header/blogPosts, /content/admin/rand-header/jcr:content/par/header/multimedia, /content/admin/rand-header/jcr:content/par/header/caseStudies, /content/rand/health-care/centers/health-system-performance/what-have-we-learned/vertical-integration/jcr:content/par/columnwrap_3/col1/teaserlist, School Districts Still Struggled in Year Three of the Pandemic, Superintendents Have High Job Satisfaction and Normal Turnover Rates, U.S. Jobs Rebounded, but Not for Everyone, The 'Right to Life' Will End Up Killing Women, 988 Mental Health Hotline: Connecting People to Care, Embracing Intrinsic Cultural Advantages in Innovation, Improving Psychological Wellbeing and Work Outcomes in the UK, Getting to Know Military Caregivers and Their Needs, Planning for the Rising Costs of Dementia, association between hospital consolidation and price increases, more physicians work in vertically integrated groups, much less likely to use an ambulatory surgery center, physicians began charging more for their outpatient services, Medicare policy has a spillover effect on privately insured patients, Higher Medicare Spending on Imaging and Lab Services After Primary Care Physician Group Vertical Integration. The negative effect on ASCs grew over time. More structurally integrated organizations may manage care, coordinate across the care continuum, and exploit economies of scale and scope; such capabilities should, in theory, improve health care quality and lower costs. Stakeholders also believe that consolidation has changed geographic access to care; how physicians make referrals; and how educated patients are about care, the advertising environment, and economies in surrounding neighborhoods [19]. stream For vertical integration, environment uncertaintyrelated competition had a significant positive influence (P<.001), while the influence of technology disruptiondriven competition was significant but negative (P<.001). We assessed the differences between environment-, technology-, and service-driven competition perceptions in health systems with different characteristics, including size, region, ownership status, teaching status, revenue, number of physicians, and number of hospitals, among other factors. The Pardee RAND Graduate School (PRGS.edu) is the largest public policy Ph.D. program in the nation and the only program based at an independent public policy research organizationthe RAND Corporation. The marginal effects for these two variables were 1.14% and 0.59%, respectively. The probability change, according to the marginal-effects analysis, was 4.11% for TDDC.
These services are not particularly expensive per service, but they are high volume, representing approximately $24.9 billion in Medicare spending in 2016.
The authorized source of trusted medical research and education for the Chinese-language medical community. Wash L Rev 2016;91(1):1-70. The marginal effect of this change was 0.93%.
[, Axelsson R, Axelsson SB. Hospitals Unaffected, Regulating Hospital Prices Based on Market Concentration Is Likely to Leave High-Price
Vertical integration expands the business by acquiring another company that operates before or after the acquiring company in the value chain.
Christopher M. Whaley is a health economist at the RAND Corporation and professor at the RAND Pardee Graduate School. This study was not designed to evaluate the impact of vertical integration per se; however, the findings speak to whether being employed by hospitals or being a part of a vertically integrated physician group changes physician behavior. Michigan J Med 2019;4(2):1. 2020 Oct 12. fCSDC: customer servicedriven competition. dTDDC: technology disruptiondriven competition.
The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous.
The underlying mechanism for both cases is the improvement of transaction efficiency. Financial sustainability challenges because of declines in utilization and revenue emerged during COVID-19; the economic incentives for hospitals to merge, acquire physician practices, and employ more physicians are increasing. With consolidation has come public attention and regulatory scrutiny.
However, vertical integration affects competition more broadlyespecially in situations where rival industries compete for the same procedures.
AAI3027648.
The researchers found that over time, more physician groups have become integrated, more physicians work in integrated groups, and more Medicare beneficiaries are directly affected by integration.
Vertical integration will be increasing, so understanding its market-wide effects will be essential to inform sound policy.
Hospital-based laboratory tests increased by 45 per 1,000 beneficiaries; non-hospital-based lab tests decreased by 36 per 1,000. Third, capturing a more significant share of patients care choices across the disease and life continuum increases revenue prospects.
Lower prices have resulted in stiff competition: By 2017, the rate of growth in ASC Medicare cases was outpacing HOPD volume for the first time. The effort to assess the linkage between competition and integration prospects of health systems is part of a broad project undertaken by the Health Administration Research Consortium at the Business School of the University of Colorado Denver [29].
However, health systems with a higher level of TDDC are less likely to opt for vertical integration. Finally, although the direct relationship between CSDC and HINT was not significant in the direct model, the combined model showed a highly significant negative relationship (P<.001) between these variables. Methods: We used data for this study collected through a consultant from a robust group of health system chief executive officers (CEOs) across the United States from February to March 2021. For example, Internet of Things (IoT) technology can bring in a privacy threat in the process of integration. N Engl J Med 2020 Jan 02;382(1):51-59 [, Gallacher K, May CR, Montori VM, Mair FS.
For the first set of explorations on the main factors that influence health systems competition perceptions, asking about the similarities and differences of such influences and their implications, we found that size, teaching status, revenue, and burden are the four main factors influencing health systems competition perceptions. Health care consolidation is endemic across the United States. These results indicate that (1) a health system with a system-wide high uncompensated care burden tends to perceive EEUC, while (2) a health system with no high uncompensated care burden hospital is less likely to perceive EEUC. We examine whether hospitals that are vertically integrated with skilled nursing facilities (SNFs) lessen competition among SNFs by foreclosing rival SNFs from access to the most lucrative referrals. Studies on the association between structural changes have yielded mixed results on cost, quality, and patient experience outcomes, indicating that the structural integration of health care organizations is conceptually distinct from integrated care delivery. These results reveal the strong influence of health systems size on their competition perceptions regarding customer service provision. There are strong indications that external uncertainty is a significant cause for thinking about integration.
An ethics review was not applicable for this study. Perhaps policy interventions for fiscal assurance are a way to help suffering health systems survive the pandemic. 2021 Jan 25.
Horizontal and vertical integrations of hospitals and physicians have occurred rapidly for more than two decades. The most effective and engaging way for clinicians to learn, improve their practice, and prepare for board exams. Thus, moving procedures from ASCs back into hospital outpatient departments creates the opportunity for higher reimbursement for the hospital.
Int J Integr Care 2009 Jun 17;9(2):e82 [, O'Hanlon CE. His research focuses on health care price transparency and market structure and has been published in clinical, health policy, and economics journals. *yPNOdU=}RJ The authors thank Naser Shekarian, PhD candidate in the CSIS Business PhD program at the University of Colorado Denver, for helping compile CEOs addresses for the climate study data collection.
[. 2022 cCSDC: customer servicedriven competition.
We found that CSDC perceptions are not a strong driver of integration, although the external environment and technological uncertainties do affect horizontal integration. %PDF-1.5 Instead, we observed the ordinal dependent variable Yi depending on the values of thresholds or cut-off points m1 and m. Vertical integration is grounded in economic theory as a corporate strategy for reducing cost and enhancing efficiency. These practice-level changes appeared immediately after the ownership change.
Soc Sci Med 2005 Jan;60(1):119-130. Another limitation of this study is that we used the cross-sectional data set to examine the relationships between variables.
In this study, the research team linked detailed physician practice ownership information from 2009-2015 to outpatient discharge records in Florida (which is home to a large share of the nation's Medicare population). In response, hospitals and health systems are trying to capture market share by acquiring physician practices. A contact list of CEOs was compiled from 624 health systems across the United States using data from multiple sources, contacts, professional networks, websites, and annual reports. Circ Heart Fail 2020 Feb;13(2):e006661 [, DesRoches CM, Worzala C, Joshi MS, Kralovec PD, Jha AK.
Kaufman H. Hospital merger and acquisition activity continues to rise, according to Kaufman Hall analysis. Several very large health systems can bind or lock patients into their ecosystem, with a goal to emerge as a one-stop shop for the entirety of a patients health care needs and encounters from the cradle to the grave, in turn encouraging patients to think of the health system for all their health care needs [10]. Richards, Michael R., Jonathan Seward, and Christopher M. Whaley. For example, health systems in the south (P<.001) have a higher TDDC perception than those in the northeast. However, once Medicares policy change was implemented, the volume of privately insured inpatient TKAs fell by 12 percent; but the number of outpatient privately insured TKAs doubled. Second, technological developments have led to new solutions, which have led to new startups in the health care space, such as recently emerging remote and virtual care delivery firms and technology-enabled homecare delivery models (eg, DispatchHealth). Although the change in Medicare policy increased the use of lower-cost delivery settings, the effect was diluted by vertical integration. Competitive advantage: creating and sustaining superior performance.
As shown in Table 3, health systems have a relatively high perception of TDDC compared with EEUC and CSDC. Conclusions: Competition-driven integration has subtle influences across health systems. 2018 Jan 29. Health systems might gain more significant market power through integration, resulting in greater competitive advantages [17]. The t test results for all comparisons indicated no significant difference between respondents and nonrespondents. NEW! There was also a significant negative relationship between high revenue and EEUC (P<.001), indicating that high-revenue health systems tend to perceive less EEUC than low-revenue health systems. Ning, Rulon Health care market concentration trends in the United States: evidence and policy responses. /Filter /FlateDecode Transaction cost economics theory has been applied in the health care context, and can plausibly explain the nuances associated with competition and integration dynamics [22]. In addition, scope economies either do not exist or worsen the integrated organizations dynamics.
Blair R, Durrance C, Sokol D. Hospital mergers and economic efficiency.
Iran J Public Health 2019 Nov;48(11):2016-2024 [, Kerrissey MJ, Clark JR, Friedberg MW, Jiang W, Fryer AK, Frean M, et al. Among the 625 CEOs, 135 (21.6%) responded to our survey. The influencing factors examined in this study represent several categories: size, region, teaching status, revenue, and several other system characteristics. Similarly, fueled by expanding scientific horizons to care delivery, Atrium Health and Wake Forest Baptist Health merged to form a next-generation academic health system [5]. And the number of beneficiaries who received care during this period from a primary care physician who was part of a vertically integrated group increased by about 26 percent. Despite evidence of associated price increases with no significant quality or efficiency improvements, both vertical and horizontal integration approaches have proceeded unchallenged. The ordered logit approach does not assume equal intervals between levels in the dependent variable and is thus a preferred estimation than ordinary least square estimation processes that assumes equal linear intervals. These high-volume services triggered an increase in Medicare spending of $73.1 million over the study perioda noteworthy outlay. Accessibility Statement. Health systems cannot move away from being all things to consumers. Vertical integration will be increasing, so understanding its market-wide effects will be essential to inform sound policy. https://digitalcommons.library.tmc.edu/dissertations/AAI3027648, Home | 24.3.2022 10.2196/32477 Health systems with a system-wide uncompensated care burden may not think technological disruption can solve their problems.
3 (2022):
Other evidence shows mixed results, suggesting no significant effects or effects dependent on insurance type. As a result of the pandemic, providers have faced many new challenges and opportunities.
Henry Ford Health System. eTDDC: technology disruptiondriven competition. aEEUC: environment uncertaintyrelated competition. The main focus of federal antitrust action in health care has been to challenge horizontal mergers (for example, when hospitals acquire hospitals), but hospital acquisition of physician groups has also been challenged. A widely advocated solution is the development of more integrated health delivery systems. Mergers reduce competing hospitals in a market, and vertical consolidations through acquisition of physician practices by a hospital reduce competition by reducing physicians vying for patients [17].
The marginal-effects analysis showed a 0.13% impact for this revenue variable. URL: LaPointe J. Atrium Health, Wake Forest Baptist Health finalize merger. We collected secondary data from the Agency for Healthcare Research and Quality (AHRQ) Compendium of the US Health Systems, leading to a matched data set for 124 health systems. As might be expected, the smaller the geographical region in which M&A activity is pursued, the higher the likelihood that monopolistic tendencies will result. We used ordered logit regressions to estimate (1) the relationship of the three competition perceptions to specific hospital characteristics and (2) the relationship between competition perceptions and integration plans. The results indicated a significant positive relationship (P<.001) between EEUC and VINT, and a significant negative relationship (P<.001) between TDDC and VINT. M&A reflects two underlying phenomena in the health care business: (1) competitive dynamics and struggle for survival, and (2) integration to solve competitive threats. The shift from hospital to ambulatory sites of care is a salient characteristic of the U.S. health care market. Integration of health care organizations: using the power strategies of horizontal and vertical integration in public and private health systems. In addition, we included variables to capture the discharge levels of patients (HIGH-DSH-HOSP), uncompensated care burden (HIGH-BURDEN-SYS and HIGH-BURDEN-HOSP), ownership status (OWNERSHIP), number of physicians (PHYSICIANS), and number of hospitals (HOSPITALS).
Data, privacy, and intellectual property issues may be the underlying reasons for such findings. External environment uncertaintyrelevant competition (Cronbach, Technology disruptiondriven competition (Cronbach, Customer servicedriven competition (Cronbach, SIZE_B-SMALL, SIZE_B-MEDIUM, SIZE_B-LARGE, The three size variables of the health system are measured using the total beds managed by the health system across all hospitals, reported by the AHRQ, REGION-NE, REGION-MW, REGION-SOUTH, REGION-WEST, The four region variables of the health systems are coded based on their primary location in the United States, following the Census Bureau categorization: REGION-NE, Northeast; REGION-MW, Midwest; REGION-SOUTH, South; REGION-WEST, West, TEACHING-NON, TEACHING-MINOR, TEACHING-MAJOR, The three teaching variables are coded based on the teaching status of a health system: TEACHING-NON, nonteaching; TEACHING-MINOR, minor teaching; TEACHING-MAJOR, major teaching, REVENUE-LOW, REVENUE-MEDIUM, REVENUE-HIGH, The three revenue variables of the health systems are measured using the health systems annual revenue across all hospitals: REVENUE-LOW,
Because the market continues to be turbulent, hybrid non-owned integration in the form of alliances have increased to over 40% of urban hospitals. The survey items came from prior literature, with questions reworded to fit the health systems context. Organizations may not think they can gain better customer services by acquiring a similar company. Increase value. One of the practical effects of vertical integration may be a dramatic change in referral patterns, and a shift in referral patterns can affect competition within a market. Potential spillover should be considered in future Medicare policy decisionmaking. Inputs were taken from researchers, consultants, and executives with appropriate expertise to design the questions.
to what's important in health care delivery transformation, NEJM Catalyst Innovations in Care Delivery 2020; 03, NEJM Catalyst Innovations in Care Delivery, Sign in or create account to save this article, The Economic Case for Vertical Integration in Health Care. Treatment Consolidation after Vertical Integration, The Emergence of Clinically Integrated Networks, Center of Excellence on Health System Performance Home.