Table of Contents
Introduction
Professionals are equally faced by emerging challenges on how to operate and optimize the use of their expertise and at the same time gain profits. Healthcare market world has registered a stunning integration which includes formation of strategic relationships between hospitals and physicians. “Hospital-physician integration appears to be a response to rapidly expanding managed care health insurance in many parts of the world” (Dynan and Bazzoli, 1992). “Integration leads to efficiency gains from transaction cost economies thereby allowing providers to offer managed care insurance plans lower prices or whether integration is really a strategy to improve bargaining power and thereby increase prices” (Dynan, and Bazzoli,1992). According Dynan, and Bazzoli,(1992), integration has little effect on efficiency, but is associated with an increase in prices, especially when the integrated organization is exclusive and occurs in less competitive markets. This paper takes a critical analysis of forms of professional integration and examines the most successful in the market. This particulars intergartion form is Fully integrated organizations (FIOs).
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In practical sense, hospital and physician working together has been seen to take on a variety of forms, this include different types of risk sharing, integration of operations, degrees of exclusivity, and capital investment(Dynan, and Bazzoli,1992). Some of the well known integration forms are: Independent Physicians Associations (IPAs), Open Physician-Hospital Organizations (OPHOs), Closed Physician-Hospital Organizations (CPHOs), Management Service Organizations (MSOs), and Fully Integrated Organizations (FIOs).
Since 1994 the AHA survey has asked hospitals whether they or their hospital system operates one of these forms. Arrangements range from loosely coupled forms of contracting, such as flexible joint ventures and shared administration to tight arrangements whereby the hospital purchases physician practice assets and the new entity engages in risk-based contracts with insurers. Hospitals also differ with respect to whether these arrangements are centralized or decentralized; in some cases individual hospitals have formed these arrangements, in others they are sponsored at the hospital-system level.
“It is approximated that 10 percent of hospitals in America have IPAs and are loose contractual networks rather than integrated firms whose purpose is to hold managed care contracts and to assist individual physicians in obtaining managed care contracts” (Bazzoli, Dynan et al. 1999/2000). By reducing contracting costs, IPAs may result in more managed care contracts and possibly higher prices. Conversely, hospitals with IPAs are less likely to have risk-based global capitation contracts (Bazzoli, Dynan et al. 1999/2000) or affect operating costs or quality.
Fully integrated organizations (FIOs)
Fully integrated organizations (FIOs), has come out to be one of the most successful integration arrangement in most hospitals. In this form of arrangement, they hire physicians as salaried employees, purchasing both physical and intangible assets. In addition, “hospitals hrough this kid of arrangement always consolidate physicians into centralized locations” (Dynan and Bazzoli, 1992). The effect on costs and quality Fully integrated organizations (FIOs) is predicted to be stronger and more effective than that of CPHO. “Clinically, they have the greatest potential for coordinating care and improving efficiency, although they face the greatest moral hazard risk due to attenuating incentives for physicians who are placed on salary” (Gaynor and Haas-Wilson 1999). “The FIOs are the most likely to accept risk-based capitation contracts from HMOs and this makes it the most reliable form of integration” (Gaynor, and Haas-Wilson 1999). In addition to being more efficient, FIOs have a stronger bargaining power and transactions costs hence high profits.
Conclusion
Professional integration is quite important in the society. This is because the arrangement benefits both professionals and the people who receive the services. In hospitals, there are a number of integrations; however, one of the most successful and reliable is Fully integrated organizations (FIOs).