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.

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.