Due to the high cost of healthcare, organizations in the United States have been changing for the last few decades trying new ways to provide services to it patients and still be profitable in the process. Organizations that are involved with downsizing are learning that horizontal integration has been declining due to health care cost, along with the risk-based payment systems. The risk-based payment has motivated the systems to consolidate, downsize, and divest because large inventory- of hospitals are no longer profitable. Medicare reimbursements use to cover high cost of hospitals when in diverse locations so there was little risk of failure. Now with the integrated health care delivery systems -An integrated delivery system is a network of entities that have joined to offer or provide a broad spectrum of healthcare services. This network may consist of separate affiliated entities, separate unaffiliated entities that participate in a network through a series of contractual arrangements. These systems can be complex in their structure due to the decisions that have to be made concerning how they plan their structured. Some concerns maybe-number and size of budget, interim providers payments, methods of allocating surpluses and deficits to providers groups, and individual providers, and what risk sharing strategies need to be in place for unseen risk that could and will arise. Working out all the details take long hours, and many meetings with top level management along with months of negotiating.
The macro levels of health care pertain to policies. This level is where overall values, principles and strategies for health care develop. The macro level works with legislators to make better health policies. Until recent years, there was not much being done to benefit the public. When the Affordable Care Act was signed, a sudden surge of people were able to afford medical coverage. This is supposed to fix our broken health care system. The enactment of the ACA will lower overall costs, make health care accessible to those that would never have had coverage. This in turn ties in with the micro level of health care delivery. The micro level is where most problems are evident. Systems fail to recognize the extraordinary importance of patients’ behaviors and the value of quality interactions with health care workers in influencing the outcomes of health care (World Health Organization, 2002). Before the enactment of the ACA, the majority of patients could not access affordable health care, making it difficult for the patient to receive a plan. Looking at health care from the micro level, patient-centered care centers have better adherence because the patient is more involved in their care plan. Research has shown us that if the patient adheres to doctors’ orders, there is a better chance of better health outcomes and eventually lowering the cost of health care (Iuga & McGuire, 2014). The quality of health care has changed a few times throughout the years. From the macro level view, health care quality improvement has a policy set in place since 1986 that reads: “There was a national need to restrict the ability of incompetent physicians to move from state to state without disclosure or discovery of the physician’s previous damaging or incompetent performance. The Federal Government has attempted to remedy this problem through effective peer review which provides immunity from civil money damages who participate in peer review. The government additionally developed the National Practitioner Data Bank to track physicians with a history of adverse actions and help stem the relocation of offending physicians (Madison, 2012). The HCQIA and ACA are great examples of the macro levels working towards better health quality.
As health care reform rolls out there is a growing focus on restructuring the health service delivery system in the hope of improving health care quality and bending the cost curve. A hey part of this focus has been on physician organization and in particular moving toward large multispecialty physician groups or hospital-physician systems that can provide integrated, coordinated patient care. There is little evidence for the superiority of these integrated models in terms of patient care quality or cost savings and that the trends toward physician consolidation has been much less dramatic than is often thought. Horizontal integration occurs when individual’s physicians join group practices or existing groups merge with each other. There are numerous theoretical reasons to expect that this type of integration might lead to improved quality and cost savings, including enhanced operating efficiency and economies of scale. Vertical integration is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company’s or entity’s power in the marketplace. Another form of vertical integration is between providers and health insurance plans. Virtual integration which allows a physician to remain independent but exploit some of the advantages of group practice, including centralized administration, risk spreading, and leverage with health plans. Vertical integration can facilitate lower costs and, ultimately, better patient outcomes. With the implementation of the Affordable Care Act there is a renewed focus on horizontal and vertical integration of physicians. Insurers have purchased medical groups in efforts to cut costs by managing patient care and physician network. The Affordable Care Act’s (ACA) focus on enhanced quality and accountability in care delivery has provided an even greater impetus to restructure. A variety of environmental forces have shaped the delivery of health services and brought about variations in the development of hospital systems. The expansion of system capacity through horizontal integrations in which hospitals acquire other hospitals has been declining and this decline primarily has been attributed to economic forces. Specifically rising health care cost, and other containment efforts and regulations have negatively influenced the horizontal growth of hospital systems. These forces have precipitated a trend toward economic concentration, consolidation, and vertical and virtual integration in which both the production and distribution stages of health care are included.
The ACA healthcare reform law has brought changes in the payer mix, declining volumes of services and patients, and has created heavy financial pressures on healthcare organizations. To minimize the risk of reduced revenues due to changes in payment and volume, healthcare organizations should come up with strategies to overcome the threats brought about by federal and state regulations and find opportunities in the competitive market for its viability. Healthcare organizations believe that one way of reducing costs is through organizational changes such as mergers, acquisitions, and joint ventures for economic advantage. “Healthcare organizations already are pursuing horizontal integration (hospitals merging to create efficiencies in acute care) and vertical integration (hospitals acquiring physician practices and ancillary service providers to increase market share and form ACOs)” (Cole, Chaudhary, & Bang, 2014, p. 111). Although merging does not guarantee success at all times, it surely comes with substantial risks. Frequent monitoring is required to determine whether anticipated results were realized. Various healthcare organizations, like UHS, have acquired several hospitals in some states to increase its buying power with vendors. However, it is critical for organizations to carefully review such proposals and contracts and projected impacts on costs before pushing through the acquisition to determine significant financial gain that supports a projected increase in ROI. While some healthcare organizations merge for major redesigns to improve administrative efficiency through increased centralization and standardization
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