Posting in Government
It has to be carefully regulated, and it falls outside the current health reform debate, but vertical integration in health care is an idea whose time has come.
What do the Veterans Administration and WalMart have in common?
Both are vertically integrated. They control their supply chains. They also deliver great value to their customers.
Thanks to vertical integration, WalMart can use the data it collects at a cash register in Atlanta to control its relationship with Chinese suppliers, just it could with their Mexican and American predecessors.
The VA can get the best deal possible on drugs, on wheelchairs, and on supplies because it, too, is vertically integrated. This integration helped motivate the creation of the VA's VistA system which, while decades old, still delivers value newer computer systems can't.
So what is it the American health care system does not have, that every other system around the world has?
Much of the present debate in the Senate, the concern over a "government takeover" of health care, is based on a fear of vertical integration. Insurers don't think they will be able to compete with a "public option" where government can buy in bulk, gaining the benefits of integration.
The answer is to let insurers integrate vertically.
Some already do, in limited ways Intermountain Healthcare in Utah owns hospitals, clinics, even hospices. Kaiser Permanente offers integrated services as an HMO. CIGNA is among the insurers offering its own Internet pharmacy.
But these are relatively modest steps. They are hampered by the fact that insurance companies are regulated by states, not the federal government. Imagine if WalMart had to get separate licenses, and run separate operations, in all 50 states? Think its smiley faces would still be rolling back prices?
Health care reformers who know what works, like Dr. Ralph Snyderman, say that coaching and medical home plans -- where patients and the medical system engage in a full relationship -- are key to controlling costs and improving outcomes.
So both sides of the balance sheet -- the supply side and the demand side -- are in fact arguing for integration. You control costs by buying in bulk. You control costs by engaging in a deep, single-source relationship with each patient.
My best friend, Tommy Bass, is a veteran. He knows the VA has many faults. But he also knows it's a good deal. So do Medicare clients. So do Medicaid clients.
We can make those deals better, and expand their reach to everyone, by allowing vertical integration. Buying in bulk and controlling the relationship. It has to be carefully regulated, and it falls outside the current health reform debate, but vertical integration in health care is an idea whose time has come.
So long as patients have choices I see no problem with it. If I don't like WalMart I can try Target. If you don't like CIGNA you should be able to try Kaiser.
Dec 2, 2009
Vertical integration is always beneficial for companies and so for in healthcare sector it has helped in healthcare costs minimization as well. http://www.ibji.com/services
I guess VA can make the deals better by vertically integration and it will be helpful in taking drugs and other healthcare supplies efficiently. http://www.gymsource.com/exercise-bikes
I guess vertical integration will surely help to bring down the costs associated with health care, I like reading about it. http://www.TampaDentalCarePlus.com
Vertical integration will force several physicians out of the market as hospitals contract with some physicians and not others. This will leave some out of the loop and that combined with the estimated number of physicians that will retire in the next five years will leave this contry with a tremendous shortage of physicians. For profict hospitals in my area have made contracts with physicians for yearly salaries twice to four times what is offered in major urban centers. This cost is an expense on the balance sheet and the hospital must offset this expense with increased revenue. This cost is past to the patient of the insurance carrier. Some hybrid contracts to physicians reward the physician with increased income form the hospital profit which in turn encourages increased utilization of hospital equipment, OR, imaging etc. Hospitals are not cheap and if you only have one in town there is no competion. Free market competition, insurance products that can be sold nationwide, HSA making the comsumer take some interest in healthcare costs, rewarding healthy lifestyle and preventing illness, quality care, and impoved information management (EHR) will do more to control cost than vertical integration!
Why use them as examples or for comparison? Wal-Mart is a huge multi-national corporation and it does things that in the free-market system are within legal means. What the government can do the free-market competitors cannot. The VA, is not a free-market system. It is a government run program and it doesn't have to compete in the everyday world of business. The VA medical system is socialized medicine. There is no competition and it can do whatever the government gives them the capacity to do. Most of the medical care that veterans get from the VA medical system is essentially "free" of charge to those veterans. It does run efficiently and it does provide good medical care for its patients. But, the services are not paid for with fees collected from the veterans. The people of the U.S., through federal taxes, are the true funding source for the VA. As such, the VA is not a good example to use in any comparison against a true free-market business, and it should never be used as a model for any possible future "government" funded health care. Government will never be an honest competitor in the free-market system when it will also be setting up the rules and it will never technically run out of funding. Funding for government services is essentially "bottomless", whereas in the free-market system, if you can't compete and you can't make a profit, you go out of business. The VA and government health-care don't ever go out of business, even when they're badly run and out of money. Case in point: Medicare and Medicaid and Social Security; all are running in the red and will be bankrupt in a few years, but they won't be allowed to fail because government will just use more money from its bottomless coffers to rescue them and keep them going.
I think there was error in the decision about vertical integration of the movie studios. They were not a monopoly. We have seen in the VA example that vertical integration can serve to lower costs. If we want competition between the public and the private sectors, should not the private sector have the same tools available to it? And if you think I'm calling for uncontrolled, unregulated oligopoly you're mistaken. We need proper regulation of markets to prevent abuse. And in the health care space we need a public option so that the vertically-integrated health conglomerates can't take advantage of their position.
...Vertical integration, when applied to something like health care, would be akin to a monopoly, thereby illegal in the United States. I know this because vertical integration has been declared a monopoly by the US Supreme court for systems that operate like American health care, because the drug companies own majority shares of most (if not all) health care organizations, thereby owning most clinics and services. This is exactly how the film industry used to be, when film companies owned the theaters you watched movies at, thereby making it so you could only see their movies. This was deemed a monopoly by the Supreme Court, thereby ruling it illegal. The reason Walmart and the VA can be vertically integrated is that they don't create the products they sell.
I'm not trying to sound confrontational, but this is not the case at Intermountain Healthcare facilities. Most of the physicians who work in Intermountain facilities also practice at Mountain Star and University of Utah facilities. Intermountain works very hard to attract private practice physicians. Physicians, on the other hand, work very hard to attract large numbers of patients, and in order to do this, they have to accept coverage from the competing insurance plans; however, hospitals are picky about the insurance plans they will accept. Ultimately, if you want to see a specific physician, he or she has to accept your health insurance and practice at the hospital where you are covered. Intermountain views its physicians as drivers for patient volume, and if they want patients to come to their facilities, they need to work with the physicians patients want to see. Also, improvement in health information management will improve healthcare, but keep in mind that information management is a key component in vertically integrated systems. When a hospital vertically integrates, information sharing between the integrated health insurance agency, hospital billing systems, and supply chain management systems is absolutely essential. You could even say that without information management systems, vertical integration is impossible.
Technically, to be termed a true monopoly, the business in question must be the only option available in its market. In some instances this is acceptable, such as in cases where the market for a product or service is too small to accommodate more than one competitor. The federal government actually encourages this for drug manufacturers that produce drugs for diseases that afflict only a small population. Regardless, Intermountain Healthcare is hardly a monopoly. In Utah, Intermountain competes with the University of Utah Health System (one hospital and several clinics), Mountain Star (seven hospitals), and Iasis Healthcare (four hospitals). Intermountain Healthcare has twenty-one hospitals in Utah; however, most of them are in rural communities, which benefit greatly from Intermountain's ability to manage so many facilities as efficiently as they do. With these four healthcare players, the competitive environment in Utah is incredibly intense. Mountain Star launched a fiercely aggressive advertising campaign in 2009 with its "Not Bigger, Just Better" ads in response to intermountain's five-building flagship hospital campus completed at the end of 2007. This rivalry has since snowballed and driven up the quality of healthcare in Utah. For Intermountain, vertical integration into health insurance provides incentive for hospitals to exercise prudence and make decisions regarding additional tests and procedures based on medical necessity instead of pay per procedure incentives. Intermountain has also recently (Oct 2012) built a state-of-the-art central supply facility to reduce the cost of purchasing and warehousing medical supplies for each hospital in their system. Over all, Intermountain's vertical integration efforts have done more to decrease the cost of healthcare and increase the rivalry among Utah providers. A monopoly? Hardly! I have four health systems to choose from, and they are all excellent thanks to Intermountain's drive for quality.