Hostname: page-component-8448b6f56d-jr42d Total loading time: 0 Render date: 2024-04-23T19:32:33.352Z Has data issue: false hasContentIssue false
  • English
  • Français

Integration: the firm and the health care sector

Published online by Cambridge University Press:  23 April 2014

Miriam J. Laugesen  and
George France
Miriam J. Laugesen*
Affiliation:
Department of Health Policy and Management, Mailman School of Public Health, Columbia University, USA
George France
Affiliation:
Institute for the Study of Regionalism, Federalism and Self-Government, National Research Council, Italy
*
*Correspondence to: Miriam J. Laugesen, Assistant Professor of Health Policy and Management, Mailman School of Public Health, Columbia University, 600 W. 168th St, MSPH Box 14, New York, NY 10032, USA. Email: ml3111@columbia.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Integration in health care is a key goal of health reform in United States and England. Yet past efforts in the 1990s to better integrate the delivery system were of limited success. Building on work by Bevan and Janus on delivery integration, this article explores integration through the lens of economic theories of integration. Firms generally integrate to increase efficiency through economies of scale, to improve their market power, and resolve the transaction costs involved with multiple external suppliers. Using the United States and England as laboratories, we apply concepts of economic integration to understand why integration does or does not occur in health care, and whether expectations of integrating different kinds of providers (hospital, primary care) and health and social services are realistic. Current enthusiasm for a more integrated health care system expands the scope of integration to include social services in England, but retains the focus on health care in the United States. We find mixed applicability of economic theories of integration. Economies of scale have not played a significant role in stimulating integration in both countries. Managerial incentives for monopoly or oligopoly may be more compelling in the United States, since hospitals seek higher prices and more leverage over payers. In both countries the concept of transaction costs could explain the success of new payment and budgeting methods, since health care integration ultimately requires resolving transaction costs across different delivery organizations.

Type
Special Section
Information
Health Economics, Policy and Law , Volume 9 , Issue 3 , July 2014 , pp. 295 - 312
Copyright
© Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

American Hospital Association (2014a), Fast facts on US hospitals. http://www.aha.org/research/rc/stat-studies/fast-facts.shtml - system [28 February 2014].Google Scholar
American Hospital Association (2014b), Percentage of hospitals with physician affiliates by type of relationship, 2001–2011. http://www.aha.org/research/reports/tw/chartbook/ch2.shtml [28 February 2014].Google Scholar
Bazzoli, G. J., Dynan, L., Burns, L. R. and Yap, C. (2004), ‘Two decades of organizational change in health care: what have we learned?’, Medical Care Research and Review, 61: 247–331.Google Scholar
Bevan, G. and Janus, K. (2011), ‘Why hasn’t integrated health care developed widely in the United States and not at all in England?’, Journal of Health Politics, Policy and Law, 36(1): 141–164.Google Scholar
Black, N. (2010), ‘‘Liberating the NHS’ – another attempt to implement market forces in english health care’, New England Journal of Medicine, 363(12): 1103–1105.Google Scholar
Bodenheimer, T. (2008), ‘Coordinating care: a perilous journey through the health care system’, New England Journal of Medicine, 358(10): 1064–1071.Google Scholar
Burns, L. R. and Pauly, M. V. (2012), ‘Accountable care organizations may have difficulty avoiding the failures of integrated delivery networks of the 1990s’, Health Affairs (Millwood), 31(11): 2407–2416.Google Scholar
Casalino, L. P., Nicholson, S., Gans, D. N., Hammons, T., Morra, D., Karrison, T. and Levinson, W. (2009), ‘What does it cost physician practices to interact with health insurance plans?’, Health Affairs (Millwood), 28(4): w533–w543.Google Scholar
Chandler, A. D. (1977), The Visible Hand: The Managerial Revolution in American Business, Cambridge, Massachusetts: Belknap Press.Google Scholar
Chandler, A. D. (1992), ‘Organizational capabilities and the economic history of the industrial enterprise’, The Journal of Economic Perspectives, 6(3): 79–100.CrossRefGoogle Scholar
Coase, R. H. (1937), ‘The nature of the firm’, Economica, 4(16): 386–405.Google Scholar
Coase, R. H. (1960), ‘The problem of social cost’, Journal of Law and Economics, 1(October): 357–376.Google Scholar
Coase, R. H. (1988a), The nature of the firm: influence’, Journal of Law, Economics, & Organization, 4(1): 33–47.Google Scholar
Coase, R. H. (1988b), The nature of the firm: meaning’, Journal of Law, Economics, & Organization, 4(1): 19–32.Google Scholar
Conrad, D. A. and Shortell., S. M. (1996), ‘Integrated health systems: promise and performance’, Frontiers of Health Services Management, 13(1): 3–40.Google Scholar
Cresswell, J. and Abelson, R. (2012), A giant hospital chain is blazing a profit trail, The New York Times (online). http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-creates-a-windfall-for-private-equity.html [30 March 2014].Google Scholar
Cuellar, A. E. and Gertler., P. J. (2006), ‘Strategic integration of hospitals and physicians’, Journal of Health Economics, 25(1): 1–28.CrossRefGoogle ScholarPubMed
Day, P. and Klein, R. (1991), ‘Britain’s health care experiment’, Health Affairs (Millwood), 10(3): 39–59.Google Scholar
Department of Health (2000), Partnership in Action: New Opportunities for Joint Working Between Health and Social Services – A Discussion Document, London: Department of Health.Google Scholar
Department of Health (2012), Integration: A Report for the NHS Future Forum, London: Department of Health.Google Scholar
Feachem, R. G., Sekhri, N. K. and White, K. L. (2002), ‘Getting more for their dollar: a comparison of the NHS with California’s Kaiser Permanente’, British Medical Journal, 324(7330): 135–141.Google Scholar
Field, S. (2011), NHS Future Forum. Summary Report on Proposed Changes to the NHS, London: Department of Health. http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/213748/dh_127540.pdf [30 March 2014].Google Scholar
Gaynor, M., Laudicella, M. and Propper, C. (2012), Can Governments do it Better? Merger Mania and Hospital Outcomes in the English NHS, Bristol: The Centre for Market and Public Organisation, University of Bristol.Google Scholar
Gillies, R. R., Shortell, S. M., Anderson, D. A., Mitchell, J. B. and Morgan., K. L. (1993), ‘Conceptualizing and measuring integration: findings from the health systems integration study’, Hospital & Health Services Administration, 38(4): 467.Google Scholar
Glasby, J., Dickinson, H. and Miller, R. (2011), ‘Partnership working in England – where we are now and where we’ve come from’, International Journal of Integrated Care, 11(Dec–Jan): e002.CrossRefGoogle Scholar
Gustafsson, B. (1990), ‘Foreword’, in M. Aoki, B. Gustafsson and O. E. Williamson (eds), The Firm as a Nexus of Treaties, London: Sage.Google Scholar
House of Commons Justice Committee (2009), Devolution: A Decade On, London: The Stationery Office. http://www.publications.parliament.uk/pa/cm200809/cmselect/cmjust/529/529i.pdf [30 March 2014].Google Scholar
Humphries, R. and Galea, A. (2013), Health and Wellbeing Boards – One Year On, London: The King’s Fund.Google Scholar
Jacobides, M. G. and Billinger, S. (2006), ‘Designing the boundaries of the firm: From ‘make, buy, or ally’ to the dynamic benefits of vertical architecture’, Organization Science, 17(2): 249–261.Google Scholar
Klein, D. B., Laugesen, M. J. and Liu, N. (2013), ‘The patient-centered medical home: a future standard for American health care?’, Public Administration Review, 73(s1): S82–S92.Google Scholar
Klein, R. (1995), ‘Big bang health care reform: does it work?: The case of Britain’s 1991 National Health Service reforms’, The Milbank Quarterly, 73(3): 299–337.Google Scholar
Klein, R. (2013), The new politics of the NHS: from creation to reinvention, 7th edition, London, New York: Radcliffe Publishing.Google Scholar
Lake, T., Devers, K., Brewster, L. and Casalino., L. (2003), ‘Something old, something new: recent developments in hospital-physician relationships’, Health Services Research, 38(1 Pt 2): 471–488.Google Scholar
Lee, T. H., Bothe, A. and Steele, G. D. (2012), ‘How Geisinger structures its physicians’ compensation to support Improvements in quality, efficiency, and volume’, Health Affairs (Millwood), 31(9): 2068–2073.Google Scholar
Le Grand, J., Mats, N. and Mulligan, J. A. (1998), Learning from the NHS Internal Market, London: King’s Fund.Google Scholar
Liebhaber, A. and Grossman, J. M. (2007), ‘Physicians moving to mid-sized, single-specialty practices’, Center for Studying Health System Change Tracking Report (18): 1–5.Google Scholar
Managed Care Digest (2014), Hospitals/systems digest, managed care digest. http://www.managedcaredigest.com/KeyFindings.aspx?Digest=HS [28 February 2014].Google Scholar
Mays, N., Dixon, A. and Jones, L. (2011), Understanding New Labour’s Market Reforms of the English NHS, London: Kings Fund.Google Scholar
McCarthy, D., Mueller, K. and Wrenn, J. (2009), Mayo Clinic: Multidisciplinary Teamwork, Physician-Led Governance, and Patient-Centered Culture Drive World-Class Health Care, New York: The Commonwealth Fund.Google Scholar
Morra, D., Nicholson, S., Levinson, W., Gans, D. N., Hammons, T. and Casalino, L. P. (2011), ‘US physician practices versus Canadians: spending nearly four times as much money interacting with payers’, Health Affairs (Millwood), 30(8): 1443–1450.Google Scholar
Mowery, D. C. (2010), ‘Alfred Chandler and knowledge management within the firm’, Industrial and Corporate Change, 19(2): 483–507.Google Scholar
Muhlestein, D. B., Croshaw, A. A. and Merrill, T. P. (2013), ‘Risk bearing and use of fee-for-service billing among accountable care organizations’, American Journal of Managed Care, 19(7): 589–592.Google Scholar
Robinson, J. C. and Casalino, L. P. (1996), ‘Vertical integration and organizational networks in health care’, Health Affairs (Millwood), 15(1): 7–22.Google Scholar
Schoen, C., Osborn, R., Squires, D., Doty, M., Pierson, R. and Applebaum, S. (2011), ‘New 2011 survey of patients with complex care needs in 11 countries finds that care is often poorly coordinated’, Health Affairs (Millwood), 30(12): 2437–2448.CrossRefGoogle Scholar
Secretary of State for Health (2010), Equity and Excellence: Liberating the NHS, London: Department of Health.Google Scholar
Shaw, S., Rosen, R. and Rumbold, B. (2011), What is Integrated Care?, London: Nuffield Trust.Google Scholar
Shortell, S. M., Gillies, R. R. and Anderson, D. A. (1994), ‘The new world of managed care: creating organized delivery systems’, Health Affairs (Millwood), 13(5): 46–64.Google Scholar
Song, Z., Safran, D. G., Landon, B. E., Landrum, M. B., He, Y., Mechanic, R. E., Day, M. P. and Chernew, M. E. (2012), ‘The ‘Alternative Quality Contract,’ based on a global budget, lowered medical spending and improved quality’, Health Affairs (Millwood), 31(8): 1885–1894.Google Scholar
Starr, P. (1982), The Social Transformation of American Medicine, New York: Basic Books.Google Scholar
Teece, D. J. (2010), ‘Alfred Chandler and ‘capabilities’ theories of strategy and management’, Industrial and Corporate Change, 19(2): 297–316.Google Scholar
Williamson, O. E. (1975), Markets and Hierarchies: Analysis and Anti Trust Implications, New York: Free Press.Google Scholar
Williamson, O. E. (1985), The Economic Institutions of Capitalism, New York: Free Press.Google Scholar
Williamson, O. E. (1988), ‘The logic of economic organization’, Journal of Law, Economics and Organization, 4(1): 65–93.Google Scholar
Williamson, O. E. (1990), ‘The firm as a nexus of treaties: an introduction’, in A. Masahiko, B. Gustafsson and O. E. Williamson (eds), The Firm: As a Nexus of Treaties, London: Sage Publications, 1–25.Google Scholar
Williamson, O. E. (2002), ‘The theory of the firm as governance structure: from choice to contract’, Journal of Economic Perspectives, 16(1): 174–195.Google Scholar
Wistow, G. (2012), ‘Still a fine mess? Local government and the NHS 1962 to 2012’, Journal of Integrated Care, 20(2): 101–114.Google Scholar