The Demand For Cost Containment

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The demand for cost containment, the growth of purchaser influence, the decline trend in inpatient utilization, and the demands of managed care organizations for efficiency, cost containment, coordination of services, and accountability for service outcomes has changed hospitals strategic planning. Hospitals need to reconfigure and reorganize their health service delivery in order to meet the demands of managed care. To make their organization attractive to the managed care industry, system integration strategies began to emerge such as horizontal and vertical integration (Sultz & Young, 2009, p. 103).
Horizontal Integration
System integration is called horizontal when hospitals buy other hospitals to become multihospital system (Wolper, 2011, p. 78). Horizontal integration provides many benefits to the hospitals: (a) increased access to capital markets, (b) reduction in duplication of services, (c) economies of scale, (d) improved productivity and operating efficiencies, (e) access to management expertise, (f) increased personnel benefits including career mobility, recruitment, and retention, (g) improved patient access through geographical integration or various level of care, (h) improvement in quality through increased volume of services for specialized personnel, and (i) increased political power to deal with planning, regulation , and reimbursement issues (Wolper, 2011, p. 79). The benefit of horizontal integration is more on the administrative level rather than

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