The Benefits Of Scope Economies

The Iron triangle for healthcare consists of cost, quality, and access; these three characteristics when balanced create great healthcare. Managed Care Organizations combine the three to offer consumers with care that is appropriate for their individual needs. Our book describes managed care organizations as “the cost management of healthcare services by controlling who the consumer sees and how much the service cost” (Basics of the U.S Healthcare System, Niles). Taking a look at the history prior to the Health Maintenance Organization Act of 1973 (HMO ACT of 1973) the implementation has been significant in balancing cost, and quality control. Before this Act was signed in to law by President Nixon healthcare costs were determined by fee for service. A fee for service or indemnity plan is a plan that allows the provider to determine the cost of service, this fee for service plan caused for healthcare costs to increase rapidly. An example of this would be going to the doctor with neck pain, being told to stretch then receiving a bill for 25,000 dollars. As could be understood the cost of healthcare had became a problem.

Dranove, D. (1998). Economies of scale in non-revenue producing cost centers: Implications for hospital mergers. Journal of Health Economics, 17(1), 69-83. Retrieved from http://search.proquest.com/docview/205800624?accountid=32521

RECOMMENDATION  There is “an inherent conflict between best care and financial performance”. The CEO states that “Finances are not, and never have been, our primary concern.” However, the business must address its decreasing profitability to be able to continue to survive. This will become even more urgent if the reduced government spending that the CEO foresees happens.  The organizational culture is high quality care, high-performance and non-profit which must be taken into account in any solution. The healthcare business has a clear focus and is very successful at continually improving its patient care and processes.  While clinical performance improvements have resulted in revenue losses for the Intermountain healthcare business the Intermountain health plan, SelectHealth, and other health plans that buy Intermountain health care services have benefitted. Intermountain needs to translate these benefits into additional profits to support its main business, healthcare.   Its skill at providing this care should translate into significant market advantage for SelectHealth and for Intermountain when selling

* Diversification can be a good way that IKEA does to sustain growth after it loses some cache. Product innovation and market development such as IKEA’s expanding goal in U.S. market. It is a risky strategy but with careful selection of the right kind of businesses, considerable improvements in profitability can be experienced.  To try and maintain growth, IKEA is considering diversification outside of the furniture market.

In He and Mellor’s article, cuts in the Medicare payments would increase the amount of care provided to the uninsured by for-profit hospitals (He and Mellor, 2016). In the article, “How Much Do Hospitals Cost Shift?” Frakt explains that nonprofit and for-profit hospitals are in competition with each other. Nonprofit hospitals encourage for-profit hospitals to enhance trustworthiness and quality. For-profit hospitals persuade nonprofit hospitals to cut costs and become more efficient (Frakt,

As a managed care organization Kaiser Permanente has served as a model for informational healthcare systems and the recent demand for affordable care has prompted the organization to lower cost in services without hindering the quality of care. Kaiser Permanente has integrated a system in which the organization assumes all financial risk and a bundled enrollment fee for service strategy. What makes Kaiser Permanente unique from other HMOs is their accountability for quality, utilization management, financial risk, and business strategies (Kaiser Permanente, 2009).

Because each type of managed care organization has certain unique characteristics, network strategies must be chosen to fit these characteristics. An organization that offers more than one type of health plan may choose to coordinate provider networks through a network-within-a-network approach. This is done by including the providers from one product's panel in the network of another panel. Provider network strategies are also found to vary with the geographic scope and market focus of the plan. A growing number of managed care organizations are attempting to build national provider

The short term decision to start in a limited area and then only grow by one state in 2015 may have served the purpose of limiting risk during a time of uncertainty, however, in the long term, penetrating into new markets may be difficult because individuals currently enrolled are automatically re-enrolled at the end of the period. For Aetna, it may be harder to pull a member from a plan that they currently have. The largest healthcare insurance company UnitedHealth was more conservative than Aetna in the first two years, with participating starting in five states in year one then increasing to 24 in year two. With the addition of UnitedHealth in the same markets as Aetna and the unknown risks associated with new enrollees for the 2015 plan year, the short term could be crucial for Aetna. If Aetna is able to add to 2014’s positive results, and increase membership in markets that UnitedHealth entered, it will go a long way toward their long term goals of increasing membership in the individual and small group sector (Demko, 2014).

Since most specialty procedures are inpatient services, EMC’s inpatient occupancy rate suffers. The occupancy rate for Emanuel Medical Center – fifty percent – is far below that of its competitors and industry benchmarks. To accompany this, EMC (on average) receives a lower reimbursement for in-patient Medicare services per patient seen in comparison to its competitors. A result such as this is correlated with directly to the fewer amount of specialty services that EMC offers. In order for Emanuel Medical Center to be able to compete with other hospitals in its service area, it is imperative that EMC evaluates what services they currently offer and are capable to offer in the future to add value to the hospital, increase its revenue stream, and expand its patient mix. Currently, Emanuel Medical Center has not succumbed to its increasing financial pressurealthough EMC has had a negative operating income for five straight years. A negative operating income places EMC at a disadvantage because it limits the hospitals ability to renovate its aging building or hire new specialists to offer revenue enhancing procedures. EMC’s competitors, on the other hand, have large sources of revenue due to their mergers with large healthcare networks such as Catholic Healthcare West. Another competitor, Kaiser Permanente Modesto Medical Center, has extremely large financial resources due to the fact

Integrated Managed Care Organization- The organization is properly aligned for the primary driver being cost cutting services. Since all entities within the organization are responsible and affected by any expenses endured on any entity being unfavorable or favorable, the foundation serves as a primary motivator to reduce costs at all levels. This alignment eliminates any financial gains from driving high utilization of services or higher intensity services within the organization. Ultimately, this system allows the physician medical group to drive care, being responsible for the clinical care decisions as opposed to health plan making those decisions as designed in other organizations. This is the preferable model for Medicaid systems as

The external stakeholders are the community, patients, MedKey System members, CMS, HMOs (ie. Blue Cross Blue Shield and Tri-Care), and any other private insurances (Richards & Slovensky, 2004). Medicare reimbursement in Alabama was the lowest rate in the nation. This was a constant struggle for the hospital administrators to try to operate on such low reimbursements for their services, which is a threat. Eighty percent of patients were Medicare or Blue Cross in which there was difficulty-negotiating prices with Blue Cross due to monopoly. Buyers have high bargaining power as reimbursements rates are low from Medicare and Blue Cross held monopoly in the services area so negotiating prices was difficult. Suppliers have lower bargaining power due to low Medicare reimbursements and difficulty negotiating prices with Blue

Although Anthem is regarded as highly lucrative, the company’s profit margins are extremely low due to the highly competitive and regulated industry. Because there is limited opportunities for market growth, health insurance companies remain competitive by merging with other companies. Anthem is currently in the process of finalizing an acquisition deal with Cigna. This deal has been faced with much scrutiny and pushback from government due to monopoly regulations. If the deal does not go through, Anthem will have to pay a large penalty fee to Cigna. Along with this financial cost, Anthem would also lose time and resources that they have dedicated to this strategy over the past two years. Because of the competitive environment and high stakes, Anthem began cutting costs throughout the company.

Organizations that strive to be a leader in an industry must look beyond their domestic boundaries and expand into international markets. The Ford Motor Company remains the second largest automotive manufacturer in the United States and fifth largest automotive manufacturer in the world with Toyota leading the way. This essay will address the Ford Motor Company’s strategic approach to compete internationally and identify which resources and capabilities make it attractive to compete internationally. Additionally, the Ford Motor Company’s diversification strategy options will be described. Lastly, we will identify how chosen diversification strategy options would lead to a strategic fit for the Ford

The corporate strategy of the business diversification is to create a synergy to achieve more performance under a single umbrella rather than diverse business units (SNU, 2016). A business diversification is to build the company shareholder value when the independent business units can perform under a single corporation as an umbrella organization instead of independent parents or a corporation. A diversified organization has many business units and each business units have its own business level strategy irrespective of whether they are related or not. A successful business diversification not only spreads the business risk across the diverse units but also adds a long term economic value to the company. The strategy for starting a new business is based on industry attractiveness test, the cost of entry and the better off test (Thompson, Peteraf, Gamble, and Strickland, 2016).

Diversification as a business strategy has a number of advantages. Diversified firms experience more stable cash flows, gain more market knowledge and when they are able to tie their different products together can often experience synergies as well. When diversification fails, however, it can drain a company's finances and create a distraction within the organization. Some firms struggle with diversification, trying to branch out from their core business repeatedly, but never being as successful in the new businesses as they are in their core business. This paper will look at two successful companies and examine some of their diversification efforts. Amazon was able to expand its product line significantly, adding dozens of product lines on top of its core lines of books and movies. Starbucks, for all its success, has struggled at times with diversification efforts. It has pulled out of markets like Australia and Israel (Mercer, 2008). It struggled with the introduction of hot food, and its attempts to branch out into music were not nearly as successful as senior management had hoped they would be.