Vertical Integration

Over the course of our countries history, the delivery of our health care system has tried to meet the needs of our growing and changing population. However, we somehow seem to fall short in delivering our goals of providing quality, affordable and accessible healthcare to our citizens. The history of our delivery system will show we continuously changed the delivery of our system however never mange to control cost. If we can come up with efficient ways to cut cost, the delivery of quality care will follow.

In today’s time, the hallmark of the US health industry is to form integrated delivery systems. An integrated health delivery system is an arrangement of health professionals and health care facilities that provide health services within a continuous organization of delivery. These systems will allow the purchaser and consumer of health care service to receive all the needed services within a all-in-one delivery system that would facilitate the needed access to the appropriate level of care at the appropriate time (Professional Issues). I.D.S presumably will also provide higher quality services and more patient centric care at relatively lower costs (Effects of Integrated Delivery Systems on Cost and Quality). To best understand integrated delivery systems (IDS), it is helpful to contrast the IDS model with health service delivery under the traditional fee-for-service (FFS) arrangement.

Following an organization announcement in 2015, the healthcare system was divided into four divisions headed by a leadership team of 5 that oversee all the divisions. The second division consists of the 3 regional hospitals associated with the New York Presbyterian system. Often hospitals associated with a healthcare system are hospitals waiting on approval from the city and HCOs involved. The 3rd division consists of NY-Presbyterian physician services. Lastly, the fourth division consists of all the health services that make up the health care system’s community and population health. These services include ambulatory care network sites and healthcare initiatives. As a Highly Reliable Organization, New York Presbyterian keeps track of multiple trends to shift and shape it’s organization for today’s always changing and complex healthcare industry. Through the tracking of consumer healthcare decisions, New York-Presbyterian uses this data to adjust its practices and policies to help patients make the best medical decisions and provide the highest quality of care. Positioned in one of the biggest metropolitan areas in the world, New York-Presbyterian keeps track of it’s competition by monitoring the consolidations of healthcare organizations within their market share. Through this monetization, the healthcare system prioritize its marketing strategy that allows them to sell the unique

Regional Hospital is located in charlotte Mecklenburg North Carolina and serves a community of an estimated 875,000 members within the integrated delivery system (IDS). Recent efforts are being spent on reviewing several proposals for integration of a disease management contract that will assist in reducing utilization costs with the primary goal of improving our patient health outcomes.

Porter’s five forces analysis provides a methodology to evaluate the external markets. Its consideration of substitutes, threats and power of buyer and supplier assists with the development of an integration strategy. A thorough analysis can isolate attractive opportunities in support of building a profitable business model. These strategies can leverage vertical and/or horizontal integration of new business entities. These entities are designed to help with growing market share, increase efficiencies and/or reduce costs. During the 1990’s many hospitals pursued a combination of both vertical and horizontal integration. The goal was to create an integrated delivery network (IDN) designed to improve their economic performance.

The Affordable Care Act (ACA) strives to improve the quality of the lives of Americans. The most current healthcare policy that endorses the ACA, is the ObamaCare initiative that has received a fair share of both support and criticism. (Hwang, et al. 2013) talks about the “Effects of the integrated delivery system on cost and quality”. According to the authors, most people criticize the American healthcare system because of its complexity, high cost and excessive fragmentation. The same scholars confirm however that the fragmentation and the provision of various services, benefit different people that require healthcare attention. The article focuses on several advantages of the integrated healthcare delivery systems (IDSs) in the United States. Furthermore, the scholars identify existing gaps, which include the various arguments of current health policy experts that have endeavored to discuss health policy issues in America. Americans can also access health care services through virtual technologies, which allow them to have different electronic health record databases. (Hwang, et al. 2013) uses relevant materials from peer reviewed and non-peer reviewed articles to describe the fluctuating nature of healthcare service delivery in America. Conclusively, the authors agree that the virtual systems create room for accountability, academic research in healthcare and efficient service delivery.

Some hospitals have merged with other healthcare organizations in hopes of providing a more integrated delivery system. However, delivery in many organizations is still quite fragmented leaving many US citizens dissatisfied. According to a 2011 survey conducted by the Commonwealth Fund;

Unfortunately, although antitrust agencies are paying attention to recent court actions against mergers, the FTC investigates only 1-2% of consolidations (McCanne, 2014). It is also important to remember than public payers such as Medicare and Medicaid set prices to physicians and hospitals with no room for negotiating and conversely private insurers may use their market-share leverage to negotiate reimbursements. Integrative care in the form of hospital consolidation has been shown to reduce costs by 10-20% but this cost has not been shown to produce a cost savings to private insurers (Cutler & Morton, 2014).

The United States healthcare delivery system is a uniquely developed system that involves various features, components, and services. The US delivery system is massive, with total employment in various healthcare settings of qualified medical professionals that provide key functions to delivering quality healthcare. The market-oriented economy in the United States attracts a variety of private entrepreneurs driven by the pursuit of profits obtained by carrying out the key functions of healthcare delivery (Shi et al. 2015).

Healthcare changes occur rapidly, and it’s a costly venture to constantly pay staff to research trends, and assist with implementation procedures. Organizations such as OAHHS have been developed to help remove that pressure individually, and allow Oregon hospitals to utilize the information that is provided and advocated for at the state level. Hospitals that take advantage of such programs benefit from this growing organization, which continues to hire new staff, are able to tackle specific projects that are of importance to those digesting information to tailor it for specialties.

Horizontal integration is the expanding of a company through increasing the service to create a stronger and more enhanced company that provides the same service. Vertical integration is when a company owned individual providers create or operates the distribution themselves. In order to provide the best healthcare service, healthcare facilities needs to offer a network of providers with a wide range of healthcare service. The term integration delivery system (IDC), “is a network of organizations that provides or arranges to provide a coordinated continuum of services to a defined population” (Shi& Singh, pg. 366). The goal for healthcare organization is to provide high quality and efficiency of care with cost reduction for healthcare aimed toward the patient population. This goal is not only a great benefit for an organization but for patient and also for healthcare services providers.

Another group often blocked is complementary or alternative health care practitioners. These restrictions and the insurance industry unwillingness to pay for these services, gives the physicians an almost monopolist control over health care. Providers must be able to enter the market for competition to work and there must be many providers vying for the patient. To get the most out of health insurance plans Consolidation of hospitals and multispecialty group practices increases the negotiating leverage of the group but in certain areas of the US a single large medical system has become the sole provider of major health service thereby restricting competition (Shi & Singh, 2008). This consolidation while giving the hospitals and group practice leverage when negotiating prices of supplies and services tends to increase the price of health care to the patient because there is no longer any competition (Shi & Singh, 2008). For these reason “competition will remain less effective in most health care markets, because the prerequisite for fully competitive markets are not fully met” (Federal Trade, 2004, p. 20).

Nevertheless, the vertical value chain created by Aldi benefits the company’s corporate strategy. To be a local supplier,

The vertical integration of J&J into health services was a win-win for the company, employers targeted as customers, and employees (Sarasohn-Kahn, 2008). The expanded growth capability through acquiring companies in the downstream will continue to help the organization offer more products and services. The current problem is that with various product offerings the quality and safety guidelines may have been overlooked. The product recalls have been a result of poor quality management and errors in the manufacturing process. The key benefits of backward vertical integration are: more control over the manufacturing of J&J products, advanced technology, and more trusted industry experience. If J&J has greater control over the upstream (selection of raw materials, production, manufacturing, marketing, and distribution) then greater stability and higher quality goods will be sent to retailers.

In all industries, competition among businesses has long been encouraged as a mechanism to increase value for patients. In other words, competition ensures the provision of better products and services to satisfy the needs of customers (Glover & Rivers, 2009). In the health care industry, competition has an impact on many relational perspectives. There have been several studies examining the relationships between competition and quality of health care, competition and health care system costs, and competition and patient satisfaction. Some elements of competition in health care are price, quality, convenience, and superior products and