| The integrated
system has become the latest in a series of strategies
that are deemed to be essential components of
the successful health care system in the future.
Unfortunately, too many hospitals and physicians
are embarking on such strategies without sufficient
understanding of why it is necessary. It seems
clear that there are several major reasons why
provider integration is absolutely crucial to
the health care system of the future. (Aaron &
Barry 1994)
• Access to Organized Provider Services.
It is exceedingly difficult to develop a systems
strategy with entities that are organized as small
enterprises (i.e., physician practices). Strategic
decisions that affect the overall directions of
the corporation are too frequently delayed, and
the ability to be responsive to an increasingly
prudent buyer is compromised. An organized provider
network allows not only for much greater freedom
in meeting the expectations of buyers, but also
for the addition of substantially better management
in physician organizations.
• Enhanced Geographic Market Presence and
Capacity. A more stable, predictable market share
can be sustained through integrated systems. The
greater geographic capacity also allows for greater
market penetration if strategic plans are implemented
in an effective manner. Also, the various subspecialties
can be offered a greater degree of protection
through collaboration with an organized primary
care referral base.
• Managed Care Contracting. Through an integrated
provider structure, bargaining clout can be maintained,
with an enhanced ability to negotiate price. Furthermore,
managed care contracting is a complex enterprise
and the managerial talent that can be identified
for an integrated system is often much better
than for smaller, individual practices. (Bender
& Leone 1994)
• Cost Elimination. Capitation, a priori,
requires efficiency and high productivity from
the system. As a result, the development of protocols,
benchmarking strategies, and quality initiatives
becomes a crucial component of preparing for a
capitated environment. An integrated system allows
the organization to pursue economies of scale
and program implementation that meet these objectives.
• Access to Technology. Allocation of resources
for traditional technology will become a major
issue during the coming decade. As funds shrink,
it will become increasingly important to evaluate
the return on investment of every major capital
expenditure. Clearly, an integrated system is
much better prepared to consider efficient utilization
of such resources. Furthermore, information technology
and its appropriate use will be the hallmark of
the successful system in the future. Integrated
systems are better equipped to implement information
systems that span the entire spectrum of services
important in capitated environments. (Blendon
et al 1994)
• Greater Access to Capital. Access to capital
will be the other major determinant of the successful
system. The marginal difference of small percentages
will be crucial in a cost-constrained environment.
Through better bond/ market rating and the ability
to spread risk over a larger base of operations,
the integrated system benefits from economies
of scale applied to capital resources.
• Approach to Developing Provider Integration.
First and foremost, the cornerstone of an effective
systems integration strategy must, a priori, use
a pluralistic model. Such a model is required
because physicians and other health care providers
are in different places at different times. A
"cookie-cutter" mentality to provider
integration does not recognize the substantial
diversity of attitude, perspective, and desire
for change that exists among providers relative
to the changing health care marketplace. Second,
the basic approach to physician/provider integration
includes vertical and horizontal strategies effected
through alliances, mergers, and acquisitions.
These strategies will ultimately be unsuccessful,
however, if hospitals engage in a strategy of
purchase/acquisition of practices without attending
to culture and philosophy. When a provider's practice
is purchased, the purchaser holds the assets of
the practice, not the patient loyalty of the practice.
Therefore, attention to other core elements of
provider practices is crucial if true integration
is to be facilitated. (Brook et al 1979)
There seems to be a core set of essential characteristics
in the organization embarked upon a successful
integration strategy:
• Seamless Flexibility. Because providers
are not in the same place at the same time, it
is imperative that a degree of flexibility exist
for moving the providers along the continuum.
The movement of providers toward a tight relationship
requires a structure where the adaptation of systems
is seamless between the various levels of integration
within the corporation.
• Continuous Reconsideration of Models.
There is no one best integration model. Rather,
there are multiple experimental models. A process
of continuous reassessment and reconsideration
of the most appropriate models for adaptation
within the corporation is a prudent approach to
the inevitable change that will continue to occur
for at least a decade. (Brostoff 1995)
• Acceptance of Mistakes as Learning. If
mistakes are not being made, the corporation is
not engaged in a sufficiently aggressive strategy
to maintain market share. Furthermore, the acceptance
of mistakes implies that the corporation is willing
to consider multiple models.
• Regional Focus. Control is shifting to
local or regional, geographically proximate regions.
Systems with strong, national, centralized strategies
are at risk in such an environment.
• No Limit on Provider Definitions. The
most appropriate providers are not always physicians.
A fully integrated system or one moving in that
direction should continuously consider the spectra
of services and of providers most appropriate
to provide the services. (Cohen 1992)
• Long-Term Focus. The focus of the corporation
must be on a long-term, not a short-term, return
on investment (ROI). The building of integrated
systems will require a substantial investment
of time.
• Provider Focus. Integrated systems recognize
that providers are the locus of control for many
decisions in the organization. Rather than attempting
to resist this phenomenon or to control it, the
integrated system embraces it to enhance the effectiveness
of decision making. (Davis 1995)
• Leader, Not Management Focus. All levels
of the integrated system must give up control
to maintain a degree of control over their lives.
This is the major reason why providers and institutions
will come together over the coming decade. To
accomplish this objective, it will be substantially
more important for an organization to possess
strong leadership rather than simply managerial
skills.
• Appreciation of Process. The integrated
organization must maintain a focus on organizing
all participants for the common good, so that
a process perspective is imperative. (Feldstein
1993)
Elements Of Provider Integration
Beyond the core characteristics, there are specific
decisions that must be made in the formative stages
of integration initiatives. Too often, these areas
are not well understood by providers and administrators.
However, insufficient attention to these core
areas often is the undoing of integration efforts.
Definitions of a vision and a culture are among
the first crucial steps for an organization seriously
pursuing the development and implementation of
a physician integration strategy. Of necessity,
they emanate from corporate leadership. Too frequently,
insufficient time is devoted to "the vision
thing," and the directions of the integration
effort are not clear to participants. Without
clear vision and culture, problems will occur;
it is simply a matter of when! (Fuchs 1991)
A second and equally important task is values
clarification. Values and norms must be clearly
stated, a priori, using a defined process that
facilitates consensus among all investors in the
integration strategy on the content of the values
statement. Value in the health care delivery process
should be defined to include verifiable cost and
quality, management activities, access, cost management,
and clinical outcomes measurements.
Third, organizational unity will evolve from clear
goals and objectives that operate in concert with
the organizational culture. Too frequently, the
goals and objectives outlined for an annual strategic
plan do not coincide with the long-term needs
of the organization. A recognition of the need
for coherence between vision or culture and actual
investments of time, people, and resources is
crucial.
Fourth, education and reeducation of physicians,
nonphysician providers, administrators, and managers
must be a top priority if the organization is
to achieve true integration. By and large, physicians
are inadequately prepared for administrative roles,
and administrators do not fully understand the
clinical perspective. The role of the physician
executive in such a circumstance becomes even
more crucial for the success of an integration
effort. (Gemignani 1996)
Fifth, it is important for physician executives
to provide leadership to governance of the organization
on integration strategies. Regular discussions
about the integration strategy and how it is progressing
are important. It is equally important, however,
to not get too far in front of governance. A strategy
that incorporates continuous education of governance
related to integration is therefore a critical
strategy for success.
Finally, any integration process will involve
a strategic planning process. To be effective,
however, the period for the traditional process
must be shortened to take into account the rapidity
of change in the health care marketplace. The
physician executive can contribute substantially
to the strategic planning process by becoming
involved in environmental scanning. Through scanning
the national environment for effective ideas,
approaches, and methods in physician/provider
integration, the process of continuously reassessing
models can become a reality for the integration
effort. (Greene 1993)
Clinical Services Integration
Clinical efficiency will be the hallmark of the
strong, competitive health care corporation within
the next five years. Clinical efficiency implies
high-quality outcomes with reliable access in
a cost-efficient manner. Several key considerations
need to be addressed by providers to facilitate
an effective integration of clinical services:
• Preventive Focus. The delivery focus of
the organization must move as far upstream as
possible to prepare for capitation. Because it
is highly likely that capitation will be the major
method of payment in the future, adapting strategies
now that are focused on long-term health objectives
is important, particularly as the actual implementation
of preventive strategies will take time. Such
an approach requires the adoption of a loss leader
strategy that recognizes that preventive services
may not be entirely cost-effective in the short
term because of inherent incentives of the current
reimbursement system. (Haveman 1995)
• Control Technology. A fee-for-service
mentality has allowed the health care system to
adapt new technology without much consideration
of effectiveness. New management systems will
be required that will force maximal utilization
of existing or new technology. The leadership
for these initiatives must come from physicians.
In fact, this may very well be one of the test
areas for the effectiveness of physician leadership
in integrated health care systems.
• Protocols. Protocols are important not
only for actual clinical services but also in
relation to human resources. In the future, it
will be important for effective integrated systems
to develop clinical workforce protocols that define
the types of health care workers needed in given
situations. Once again, maximal utilization of
resources is the driving force and will require
physician leadership.
• Information Systems. Development of state-of-the-art
information systems must be one of the top corporate
priorities of an evolving integrated system. Without
the infrastructure of accessible, reliable, and
current information, any attempts at developing
an integrated system will fail. Coordination of
the managerial and clinical components of the
management system is also crucial. Most systems
are rudimentary but evolving rapidly. Information
systems should be designed for growth beyond expectations.
(Juster & Suzman 1994)
Levels Of Integration
Effective integration strategies fall along the
entire spectrum of health care activities. Although
levels are defined, it is not a requisite that
each level precede the following level. The various
levels are somewhat fluid and are rough estimates
of divisions or categories. Some would argue that
a continuum of services exists in systems integration.
It may be more advantageous to think in terms
of a spectrum of services that can be included
in an integration strategy. A continuum implies
some degree of hierarchy, whereas a spectrum implies
use of best approaches in meeting particular strategic
needs of the health organization. (Katt 1997)
Level I: Physician/ProviderLeadership Education
andTraining (Support). Often, the most neglected
integration strategy is a defined and regular
process of physician education that includes the
use of outside experts and advisors. Specific
elements include:
• Health Services Education Initiative--Providers
are generally deficient in their understanding
of health systems. The focus of education would
be on health services.
• Management Development--The greatest liability
of most systems is the insufficient number of
trained clinician managers.
• Physician Discussion Groups--The provision
of support for ongoing dialogue among providers
may result in intragroup education. (Long &
Rodgers 1993)
Level II: Individual/Small Group Practice Assessment
(Support). Many physicians/providers, even in
aggressive marketplaces, are not yet prepared
to engage in active integration activities. Rather
than neglecting these individuals or small groups,
however, it is prudent to provide ongoing support
and assessment services. The inevitability of
the marketplace will no doubt force these providers
to collaborate, then integrate, with a system.
This category includes all of the items listed
for Level I, plus:
• Practice Valuation--Providers often possess
unrealistic expectations of the value of a practice.
A practice valuation program based on a specific
philosophy can provide valuable insight for the
provider.
• Staffing Analysis--Efficiencies can be
highlighted as part of the process.
• Practice Management Advice--Allows the
provider to test the abilities and expertise of
the corporation while maintaining an arm's length
relationship. (Loprest & Uccello 1997)
Level III: Medical Service Organization (Coordination).
The MSO provides a cafeteria of selections for
physicians/providers from which to augment their
practices. This category includes all of the items
listed for previous levels, plus:
• Joint Purchasing--A reduction in the cost
of goods and services can often be accomplished
through a joint purchasing program. Although many
hospitals have participated in such efforts, such
approaches are often very new to ambulatory care
practices.
• Marketing--Mutually beneficial joint marketing
can promote the interests of physicians and the
institution in a coordinated fashion to maximally
benefit the participant's practice or services.
• Recruitment--Physician and nonphysician
provider recruitment is an invaluable service
to smaller groups because of the economies of
scale that can be achieved.
• Management Contracts--Involves IPA or
medical group management contracts. (Lundberg
1991)
Level IV: Integrated Primary Care and Specialty
Networks (Collaboration). Integrated networks
are an interim step between MSOs and a fully integrated
group practice organization. It is a step that
entails much greater collaboration, with recognition
that unification of goals is on the horizon. This
category includes all of the items listed for
the previous levels, plus:
• Strategic and Business Planning--Coordination
of business planning is critical to the success
of joint efforts at this point and beyond.
• Capitation Management--Assign-ment of
capitation risk with appropriate management oversight
is often one of the first elements that lead to
greater integration of the system with providers.
• Credentialing--A reduction in the process
required for credentialing can be accomplished
through a joint effort.
• Program Development--Program development
often focuses on areas where there is a common
need and mutual involvement benefits the overall
success of the initiative (e.g., cardiac education
programs).
• Financial Systems Support--Shared financial
systems infrastructure to reduce capital outlays
for systems support is a key approach.
• Collaborative Program and Systems Service
Development--Codevelopment of programs or services
is the most common approach to this area.
• Common Pathways--The focus on pathways
can be both clinical and nonclinical in nature.
• Coordinated Information Systems--Sharing
of information is maximized, although some elements
may remain confidential and proprietary.
• Coordinated Capital Investments--The capital
investment strategy can take the form of joint
ventures or sharing of capital investments for
mutual support, with final control retained by
the individual entities. (Pauly 1990)
Level V: Integrated Group Practice Organization
(Integration). The result of physician/ provider
integration should be a multispecialty group practice
that is totally integrated with other elements
of the health care delivery system. This category
includes all of the items mentioned for previous
levels, plus:
• Clinical Capitation--The health care financing
system will move quickly along the continuum of
financing mechanisms toward capitation over the
remainder of the 1990s. Capitation implies a new
paradigm in process and methods for most health
care organizations, including new definitions
of the types of providers who can and will provide
services.
• Pathways Unification and Standardization--Clinical
and nonclinical pathways are defined. However,
less tolerance of deviations will exist in a totally
integrated system.
• Systems Integration--The managerial infrastructure
of the organization can be consolidated for such
areas as financial, human resources, purchasing,
and other related areas. At the same time, it
is critical to recognize that systems must be
customer-focused and provide added value, not
necessarily centralized.
• Unified Information Systems--The hallmark
of the future integrated system will be the integration
of information.
• Unified Governance--A unified governance
structure allows for the decision-making process
to support service integration to the fullest
possible extent.
• Integrated Capital Investments--All capital
investments are made from a systems perspective
rather than a provider or an institutional perspective.
Value-added assessments will become the norm of
such decisions.
• Education--Under integrated systems, education
can be added under the new cost-constrained environment.
Unless education is an inherent function of the
corporation, it will have difficulty in being
sustained in a capitated environment.
• Research--The education issues also apply
to research. (Pauly 1991)
Level VI: Integrated Health System (Consolidation).
Once provider integration is accomplished, a more
systems approach to health care can be the primary
objective of the health organization. Services
in an integrated health system extend beyond the
traditional services provided in a medical environment
and relate more to the health of the community.
This category includes all of the items listed
for previous levels, plus:
• Total Capitation--The entire spectrum
of health services can be provided to patients
under a total capitation arrangement.
• Allied Provider Integration--With the
successful integration of physician providers,
other services can be effectively integrated to
provide a full spectrum of health services (e.g.
dental, chiropractic, social, health education,
etc.).
• Community Interagency Coordina-tion--Certain
services within the community provide focal, niche
services that cannot be readily replicated as
internal functions of the integrated delivery
system. They can, however, be fully coordinated
with the system (e.g., planned parenthood).
• Community Agency Integration--The full
spectrum of services beyond traditional medical
services can be integrated with the provider network,
including such areas as adult day care, home health,
hospice care, healthy heart programs, and other
similar community agency efforts that relate to
the traditional health care system. (Pindyck 1991)
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