Managed care, vertical integration strategies and hospital performance.

OBJECTIVE: The purpose of this study is to examine the association of managed care with hospital vertical integration strategies, as well as to observe the relationships of different types of vertical integration with hospital efficiency and financial performance. DATA AND METHODS: The sample consists of 363 California short-term acute care hospitals in 1994. Linear structure equation modeling is used to test six hypotheses derived from the strategic adaptation model. Several organizational and market factors are controlled statistically. PRINCIPAL FINDINGS: Results suggest that managed care is a driving force for hospital vertical integration. In terms of performance, hospitals that are integrated with physician groups and provide outpatient services (backward integration) have better operating margins, returns on assets, and net cash flows (p < 0.01). These hospitals are not, however, likely to show greater productivity. Forward integration with a long-term-care facility, on the other hand, is positively and significantly related to hospital productivity (p < 0.001). Forward integration is negatively related to financial performance (p < 0.05), however, opposite to the direction hypothesized. CONCLUSIONS: Health executives should be responsive to the growth of managed care in their local market and should probably consider providing more backward integrated services rather than forward integrated services in order to improve the hospital's financial performance in today's competitive health care market.

Effect of organizational and environmental factors on service differentiation strategy of integrated healthcare networks.

During the past decade, the missions/goals of medical providers of healthcare services in the United States have shifted--from emphasizing individual, independent illness treatments to focusing on the continuum of care, population-based wellness, and providing the appropriate care in the most efficient way. Integrated healthcare networks (IHNs)--or integrated healthcare delivery systems--have been focusing heavily on their level of various partnership integration (i.e. service differentiation strategy) in order to offer a full continuum of care. The aim of this study, using the individual IHN as the unit of analysis, was to identify organizational and environmental factors that influence IHN administrators to focus on their service differentiation of market lines, including the establishment of third-party payers' contracts, the affiliation of managed-care organizations, and the alliances of various nonhospital medical providers, to provide a continuum of care. The study findings show that tax status of an IHN, its age, and market competition affect its service differentiation strategy in the provision of a full continuum of care.

Integration and the performance of healthcare networks: do integration strategies enhance efficiency, profitability, and image?

PURPOSE: This study examines the integration effects on efficiency and financial viability of the top 100 integrated healthcare networks (IHNs) in the United States. THEORY: A contingency-strategic theory is used to identify the relationship of IHNs' performance to their structural and operational characteristics and integration strategies. METHODS: The lists of the top 100 IHNs ranked in two years, 1998 and 1999, by the SMG Marketing Group were merged to create a database for the study. Multiple indicators were used to examine the relationship between IHNs' characteristics and their performance in efficiency and financial viability. A path analytical model was developed and validated by the Mplus statistical program. Factors influencing the top 100 IHNs' images, represented by attaining ranking among the top 100 in two consecutive years, were analysed. RESULTS AND CONCLUSION: No positive associations were found between integration and network performance in efficiency or profits. Longitudinal data are needed to investigate the effect of integration on healthcare networks' financial performance.

Analysis of integrated healthcare networks' performance: a contingency-strategic management perspective.

Few empirical analyses have been done in the organizational researches of integrated healthcare networks (IHNs) or integrated healthcare delivery systems. Using a contingency derived contact-process-performance model, this study attempts to explore the relationships among an IHN's strategic direction, structural design, and performance. A cross-sectional analysis of 100 IHNs suggests that certain contextual factors such as market competition and network age and tax status have statistically significant effects on the implementation of an IHN's service differentiation strategy, which addresses coordination and control in the market. An IHN's service differentiation strategy is positively related to its integrated structural design, which is characterized as integration of administration, patient care, and information system across different settings. However, no evidence supports that the development of integrated structural design may benefit an IHN's performance in terms of clinical efficiency and financial viability.

Organizational and market determinants of HMOs' performance of preventive practices.

This study validates the measurements of performance of preventive practices and identifies organizational and market factors that affect variations in the preventive care practices of health maintenance organizations (HMOs). Confirmatory factor analysis was used to assess HMO performance, reflecting the rates of five preventive practice services. A structural equation model of the preventive practice performance of HMOs was evaluated. It was discovered that HMOs that employ more board-certified primary care practitioners have a higher rate of preventive care practices and that market competition and market forces do not influence the variation in HMO preventive care practices.

Mastering health care executive education: creating transformational competence.

The effective health services executive needs to continue to develop analytical, technical and behavioral skills to anticipate and meet the changing requirements of the health care industry. Those leading the field of health administration will need to be competent in achieving transformations. Lifelong learning is a necessity. As the structure and knowledge of the field change, so must the ways of exchanging information about health and medical care. Distance learning is a strategy for lifelong learning that can be used to continue one's education. In order to be successful in positioning a health care organization in the competitive world, investment in continued education to update strategic thinking and the analytical competency of executives and managers is imperative. Academic programs able to respond to the educational needs of the health care industry have a dedicated faculty who understand corporate culture and competitiveness in the health care marketplace and are able to offer effective adult education using cutting-edge computer technology for distance learning.