Integration can occur at the system level or across a patient population.[xxi] The degree of integration depends on local market realities[xxii] and various factors, including the extent to which providers are assimilated into the larger system and the proportion of health services that are fully integrated in the system.[xxiii] Most systems are in an ever-evolving state of integration, attempting to provide a full continuum of services in a user-friendly, one-stop-shopping environment that eliminates costly intermediaries, promotes wellness and improves health outcomes.
Horizontal and Vertical Integration
There are two main types of integration used in integrated delivery systems (IDS) – horizontal and vertical.
Horizontal integration is defined by the Pan American Health Organization (2008) as “the coordination of activities across operating units that are at the same stage in the process of delivering services.”[xxiv] Horizontal integration involves grouping organizations that provide a similar level of care under one management umbrella. It usually involves consolidating the organizations’ resources to increase efficiency and utilize economies of scale.[xxv] Examples of horizontal integration include the following:
- multihospital systems
- strategic alliances with neighboring hospitals to form local networks[xxvi]
Some systems have demonstrated horizontal success by acquiring and combining prestigious hospitals and then achieving higher reimbursement rates from payers willing to pay more for their services.[xxvii] Examples of these systems include the following:
- Partners HealthCare
- Sutter Health
Vertical integration is defined by the Pan American Health Organization (2008) as “the coordination of services among operating units that are at different stages of the process of delivery patient services.”[xxviii] Vertically integrated systems are intended to address the following:
- Efficiency goals
- manage global capitation
- form large patient and provider pools to diversify risk
- reduce cost of payer contracting
- Access goals
- offer a seamless continuum of care
- respond to state legislation
- Quality goals
- assume responsibility for health status of local populations
Unlike horizontal integration, which integrates organizations providing similar levels of care under one management umbrella, vertical integration involves grouping organizations that provide different levels of care under one management umbrella.[xxix] This type of integration can include acquisitions/alliances with the following:
- Physicians (primary care providers, physician-hospital organizations, management service organizations, etc.)
- Health plans or health maintenance organizations
- Academic medical centers
- Long-term care facilities
- Home care facilities[xxx][xxxi][xxxii]
Kaiser Permanente is the most well-known example of a fully integrated delivery system.
- Kaiser Permanente operates in nine states, including Washington, DC, and has almost 9 million members, 14,000 doctors and 160,000 employees.
- The system owns and operates more than 420 freestanding ambulatory care facilities and 30 medical centers (hospitals and ambulatory).
- The medical centers offer one-stop shopping for most services, including hospital, outpatient, pharmacy, radiology, laboratory, surgery and other procedures, and health education centers. This set-up encourages patient compliance and enhances opportunities for physicians at the primary care level to communicate and consult with specialists, hospital personnel, pharmacists, etc.[xxxiii]