Competition and Business Conditions in Health Care Markets

Introduction

Changes in health care financing and the business environment have spurred competition among health care organizations. Patients and health care consumers demand services from suppliers in local markets, and hospitals and providers compete for these patients, depending on their health insurance plans. These forces are leading to changes in existing health care organizational and market structures, including hospital ownership of physicians' practices (e.g., vertical integration) and the formation of integrated delivery systems. As a health care administrator, you must understand implications of this competition and the often resulting organizational integration.

As you explore competition and business conditions in health care markets, you compare advantages and disadvantages of vertical integration in health care organizational structures. You also recommend strategies for the organizational integration of hospitals and providers.

Required Resources

Note: To access this week's required library resources, please click on the link to the Course Readings List, found in the Course Materials section of your Syllabus.

Readings

· Getzen, T. (2015).Health economics for the healthcare administrator(Laureate custom edition). New York: Wiley.
· Chapter 8, "Hospitals" (pp. 172-186)
· Chapter 12, "Financing and Ownership of Health Care Providers" (pp. 259-287)

· Colla, C. H., Lewis, V. A., Shortell, S. M., & Fisher, E. S. (2014). First national survey of ACOs finds that physicians are playing strong leadership and ownership roles.Health Affairs,33(6), 964-971.Retrieved from the Walden Library databases.

· Cutler, D., & Scott Morton, F. (2013). Hospitals, market share, and consolidation.Journal of the American Medical Association, 310(18), 1964-1970.Retrieved from the Walden Library databases.

· Fisher, E. S., Shortell, S. M., Kreindler, S. A., Van Citters, A. D., & Larson, B. K. (2012). A framework for evaluating the formation, implementation, and performance of accountable care organizations.Health Affairs,31(11), 2368-2378.Retrieved from the Walden Library databases.

· Healthcare Financial Management Association. (2014a).An HFMA value project report: Acquisition and affiliation strategies. Westchester, IL: Author. Retrieved from http://www.hfma.org/WorkArea/DownloadAsset.aspx?id=23451An HFMA Value Project Report: Acquisition and Affiliation Strategies by Healthcare Financial Management Association. Copyright 2014 by Healthcare Financial Management Association. Reprinted by permission of Healthcare Financial Management Association via the Copyright Clearance Center.

Discussion

Health Care Organizational and Market Structures

Scenario: You are the chief financial officer (CFO) of a hospital located in a highly competitive, urban market split with two competing hospitals. The hospital is considering purchasing or affiliating with a large physicians' practice. Your hospital has 30% market share, but does not currently have any owned/employed physicians. Private insurers and Medicare are aggressively pushing value-based reimbursement under ACO contracts, and the one competing hospital has already acquired a large physicians' practice.In an industry as complex as health care, organizational and market structures must be carefully considered. To participate in accountable care organizations (ACOs) and other value-based care initiatives, for example, hospitals need to have a coordinated care organization model across ambulatory care, acute care, and other settings. Developing these coordinated relationships may require vertical integration to ensure efficient utilization. Although there are many advantages to this integration of organizational and market structures, there are some disadvantages for both the hospital and the providers. For this Discussion, examine the following scenario and recommend strategies for the organizational integration of the hospital and practice.

To prepare for this Discussion:

· Analyze the provided scenario. What are the advantages and disadvantages of the vertical integration of the hospital and physicians' practice? What economic factors should be considered?

· Consider strategies for the organizational integration of the hospital and physicians' practice. Be sure to address the economic factors you identified.

Post a cohesive response to the following:

Compare advantages and disadvantages of the vertical integration of the hospital and physicians' practice, including economic factors that should be considered. Then, recommend strategies for the organizational integration of the hospital and practice. Defend or argue your recommendations using economic principles.

Support your response by identifying and explaining key points and/or examples presented in the Learning Resources.

Read a selection of your colleagues' postings. Consider how your colleagues' postings relate to the information presented in the Learning Resources and to your own posting.