Integrated Delivery Systems

Outline

This paper examines integrated delivery systems as the new buzzword in health care. Attention is focused on the US health care picture, where IDS is becoming a popular mode of health service delivery. First, IDS is defined in terms of concept, rationale and possible benefits. The strategic arrangements forged under the system follow, with the section citing specific examples of IDS alliances. The succeeding section analyzes the arguments raised for or against the system, including the risks that may decrease the value of IDS. The conclusion is drawn based on all the readings.

Introduction

Health care providers used to serve patients individually and on the basis of need, with the health care provider accountable only to the patient for any miscarriage of such service. Under this system, physicians have to serve all patients whether they can afford to pay or not, which is part of their Hippocratic Oath. In terms of efficiency, there are no backup systems to guarantee that if one health care provider falls short of expectations, other professionals will compensate for the deficiency. These are the flaws that apparently gave rise to the concept of an integrated delivery system in health care, which links together physicians, nurses, health insurance firms, tax specialists and other allied health professionals to make health care a systematically managed and continuous affair. This paper discusses integrated delivery systems (IDS) and how such linkage impacts the delivery of health care services, with particular attention on the US where over 850 IDS have been formed (Boone & Maley, 2000). First, IDS is defined as to concept, rationale and possible benefits. The strategic arrangements forged under the system follow, with the section citing specific examples of IDS alliances. The succeeding section analyzes the arguments raised for or against the system, after which the paper makes its own conclusion based on all the readings.

Definition

An integrated delivery system is defined as a network of health care professionals and organizations coming together to provide a continuum of services to a defined population and is willing to be held clinically and fiscally accountable for the clinical outcomes and health status of the population served (Sultz & Young, 2008; Boone & maley, 2000). This makes health care a closely managed activity with a multitude of professionals involved, in sharp contrast to the old system which depends entirely on a single provider who may or may not have the sufficient equipment or knowledge to ensure an efficient service. Within an IDS, the services may come in terms of a fully equipped hospital or community, home health care and hospice services, primary and specialty outpatient care and surgery, social services, rehabilitation, preventive care, health education and financing (Kronenfeld, 2002). An IDS may also be a training program for physicians, nurses and other health professionals, in which case a conglomeration of organizations are involved.

An IDS is one organization responsible for providing all services, including delivery of care, payment and risk management. It serves as a sort of one-stop shop for all health services, with care coordinated and managed from start to finish to keep patients healthy. Because it is managed, the network avoids duplication and conserves resources to eliminate unnecessary costs. An integrated provider offers a comprehensive corporate umbrella for the management of a diversified health care delivery system (Sultz & Young, 2008). The system may include one or more hospitals, a large group of practitioners, a health plan and other health care

operations, with physicians practicing as employees of the system in a tightly affiliated medical group (Barton, 2006).

In general, the objectives of IDS in health care are quality improvement and cost reduction (Barton, 2006). The quality of health care is expected to improve because of the increased number of service providers who will pool their expertise for a common objective. Without integration, the outcome of health care depends on only one person. As for the possible reduction in health care costs, this will come as a result of the sharing of risks and costs among the IDS participants, which also means less overhead or administrative expense and more efficient use of technology or capital (David, 2009). Since an IDS is a closely managed system of health care, there is less waste in the use of resources and continuity of the service is better assured. This seamless quality that puts health care in a continuum is expected to be received well by consumers and the community. In fact, an IDS has been formed precisely to improve the health status of an entire community, whereas other integrated systems only serve an enrolled segment of the population (Kronenfeld, 2002).

Strategic Arrangements

The most common strategic arrangement for IDS is one involving physicians and hospitals. Under this arrangement, physicians sign a professional service agreement with hospitals to extend their practice to patients enrolled in a managed IDS. This means that the IDS-engaged physicians still conduct their own medical practice and are involved in the collaborative system to supplement their income. According to David (2009), it is precisely physicians and hospitals in very competitive areas that form an IDS to achieve more marketability. In many cases, physicians and hospitals form an IDS to test the waters of integration and eventually become permanent when consumers and the community respond favorably. While participation in an IDS creates no significant changes in the practice of a physician, he now works on a health plan wherein the integrated provider is both a health care provider and a payer (Barton, 2006). The IDS enrolls patients for the health plan, sets and collects premiums and provides the necessary care. It pays the physicians as well as other professionals and organizations involved in the system such as nursing homes and pharmacies. The integration system is a welcome experience for physicians who become part of the board that makes the strategic plans.

Hospitals may also enter into a joint venture with other organizations to form an IDS. Many of the integrated delivery systems in health care are in fact forms of joint ventures (Silverman, 2003), which are described as a legal arrangement between two or more organizations to provide a product or service. The bottom line is that all participants in a joint venture share both the rewards and risks of an undertaking.

Hospitals participate in a joint venture directly or indirectly, through a subsidiary, through its parent corporation or through another subsidiary of the parent company. Selecting the most appropriate structure depends on the objectives of the hospital and consideration of financial, legal, political and regulatory factors. Sometimes an arrangement other than a joint venture may best suit the circumstances. (Sultz & Young, 2008). Hospitals may also join a Health Maintenance Organization (HMO), which is another example of an integrated provider. An HMO combines in one system the delivery and financing of health care to an enrolled population for a fee, which is paid upon enrolment. This pre-paid configuration in IDS is the subject of controversy, which is discussed in the latter part of this paper.

The arrangements for IDS may also come in the form of partnerships, which can be a general or limited partnership. The IDS partnership is general if it is jointly owned and controlled by the members, with each partner having equal control over management as well as equal share in the profits or losses (David, 2009). It is a limited partnership if some members are not allowed management control. Thus, one partner handles day-to-day management to the exclusion of other partners whose only concern is their investment in the partnership. In some integrated systems, the general partner is a corporation and a hospital is a limited partner, which by its nature is averse to financial risks. IDS are sometimes structured as a corporation such that the working arrangements follow the corporate pattern. Management is centralized and legal liabilities are limited to the board of directors.

According to Boone & Maley (2000), there were over 850 integrated health care delivery systems (IDSs) in the US, which provide a full continuum of services in a user-friendly, one-stop-shop environment that eliminates costly intermediaries, promotes wellness, and improves health outcomes. These systems are characterized by strong physician-hospital links, coordinated systems of care, geographic reach, quality management, contractual capabilities, utilization controls, financial strength, organized oversight and economies of scale. An honest evaluation of just how integrated each component of a system is will determine the strategies necessary to contain its risks. The typically large size of organizations, the geographical distances and structural differences among components, and the differences in services and staff involved creating formidable challenges to those responsible for risk management.

Analysis

The concept for integrated delivery systems took shape supposedly in response to the complaints against rising health care costs and the increasing public disaffection with hospitals and other health care organizations. This happens when physicians set any price they want for their services, which they always get because patients have no other options. For this reason, most people avoid hospitals and physicians except for extreme ailments. Can the integrated delivery system reverse this perception? According to David (2009), IDS are formed among hospitals, physicians, nursing homes and other health-related entities precisely to provide the best possible combination of health care services to consumers. By introducing management practices into health care, it is indeed possible that costs may be reduced because of the more judicious use of resources and facilities. Greater efficiency could also result from the coordinated activities of IDS participants such as the sharing of medical records, which saves time and paperwork. For the organizations involved in IDS, it means a newfound power since integration gives them strength and market clout they cannot obtain alone. In fact, many health care providers are finding that involvement in an IDS is the most efficient and cost-saving way to provide the service demanded in today’s health care market (David, 2009). However, integration is not recommended for all health care professionals and organizations given some work processes that are better left alone.

According to Boone & Maley (2006), IDS has caught the attention of skeptics because of the negligible financial gains achieved by participating hospitals. Critics of integration believe this happened when the IDS concept created new risks for health care providers, reduced quick access to health care, and limited the freedom of choice for both providers and consumers. These risks are expected to be increased by the current health initiative of the US government which calls for stricter regulation on such areas as medical malpractice, antitrust issues, shareholder rights, employment practices and officers’ liabilities. There is an emerging health care environment in which physicians confine their services to people with medical insurance or those who can afford to pay, which can result from the third-party payer put in place by IDS. With this third-party payer as the purchaser of services, health care becomes just another business, with physicians attending to the sick on the basis of remuneration rather than on need. In this case, large segments of the population may be deprived of health care since they have no medical insurance or medicare coverage. On the other hand, it must be considered that medical care is the physicians’ only source of livelihood and so it is within their right to reserve their services to those who can afford to pay for them. In effect, IDS makes health care a commodity that must be purchased by those who need it.

Conclusion

Despite the apparent benefits of IDS, there appear to be some gray areas that can staunch its development. One is the possibility that the management of health care will transform the service into a business that puts a premium on profit and the financial bottom line. This may be good for health care providers but what about poor patients without medical insurance and medicare? Studies show that integrated delivery systems can work through business savvy and leadership. More emphasis should be given on social commitment and responsibility, which are contained in the Hippocratic Oath of physicians. IDS means cost savings, more competitiveness and improved quality of care but the benefits appear to go only in the direction of the IDS participants. Physicians and hospitals have a mission, which is different from the mission that ordinary businesses set for themselves. If the IDS distracts these health care providers from that mission, the system can never be successful.

Bibliography

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