Integrated Health Delivery Systems
This article provides an introduction to the development and growth of integrated health delivery systems. The article examines how the pressures of cost control, access, and quality of care have driven the structure and organization of integrated systems. Included is a consideration of how integrated systems have succeeded or failed to deliver on the anticipated outcomes they were established to achieve. Finally, the future of integrated systems is briefly reviewed.
Keywords Fee-for-service; Horizontal Integration; Integrated Delivery Systems; Managed Care; Vertical Integration
Health Care Management: Integrated Health Delivery Systems
An integrated health delivery system is an arrangement of health professionals and health care facilities that provide health services within a seamless organization of delivery. To best understand integrated delivery systems (IDS), it is helpful to contrast the IDS model with health service delivery under the traditional fee-for-service (FFS) arrangement. In FFS, a patient would see his or her physician and then be billed for a patient visit. If the patient's presenting problem required hospitalization, the patient would receive a minimum of two separate bills, one from their physician for medical consultation during the hospital stay and one from the hospital for the use of hospital services. If the presenting problem required additional diagnostic procedures or multiple therapeutic interventions, the patient would receive a bill from each consulting physician as well as charges for all ancillary services used, such as pathology laboratory, radiology, etc. Each time the patient sees a different physician or other provider, he or she has to re-tell the story of the presenting problem. From the provider standpoint, he or she has to follow-up on each additional consultation.
Once discharged from the hospital, the patient is confronted with a confusing array of bills and charges for each physician consultation and hospital service provided. This process of separate and individual billing is entrenched in health service delivery because under this arrangement, both physicians and hospitals (or other health service facilities) can maximize their individual billing and maintain tight control over their revenues.
In an integrated delivery system, a patient receives one bill from the health system detailing all charges and then writes one check for payment. Or, more likely, the patient's health insurance company or managed care provider receives the bill and makes the payment. In either case, paperwork and the management of paperwork is greatly reduced, resulting in considerable cost savings. Also, frustration is greatly reduced because in the event of mistakes in charges, the payers (either the patient or the health plan) can deal with one billing entity rather than multiple entities.
In the late 1980's and early 1990's, payment arrangements for health care began shifting away from traditional FFS and indemnity plans toward capitated managed care and health maintenance organizations (HMOs). Integrated delivery systems emerged as the next evolutionary phase for health system organizations. They were touted as being more efficient, more cost effective, and better able to deliver a higher quality of patient care through the use of information technologies and centralized management operations and procedures. How such systems function and whether they have delivered on the promise of reduced cost and better patient care is the subject of this essay.
The Evolution of Integrated Delivery Systems
As technology in the practice of medicine has increased, the number of medical providers and the facilities and ancillary services required for diagnosis and treatment have increased correspondingly. Gone are the days of the general practitioner who carried out both diagnosis and treatment in the office or at the bedside in the hospital. For example, a simple uncomplicated broken bone now encompasses a visit to a primary care physician for initial diagnosis and referral. Referrals include a trip to the radiology center for x-rays and a visit to an orthopedist, who will confirm the diagnosis and have a technician put on the cast. There will be several follow-up visits to the orthopedist to ensure the bone is setting correctly. Once the cast is off there will likely be treatment by a physical therapist to restore the now healed bone to full function.
Where once one provider was responsible for treatment and subsequent billing, in this broken bone example, there are six providers (the primary care physician, the radiology technician who takes the x-ray, the radiologist who writes the radiology report, the orthopedic specialist, the orthopedic technician, and the physical therapist). In addition, there are four provider facilities involved — the primary care physician office, the hospital or radiology center that houses the radiology equipment, the orthopedist's office, and the physical therapy center. Each provider submits charges, and each facility submits charges. In this arrangement, each provider and each facility will have billing policies in place to maximize revenue from each patient encounter. Each provider and each facility will have its own method of maintaining patient records, its own operating procedures for billing and collection, and its own business management system for personnel, accounting, maintenance and custodial service, and record keeping.
In our hypothetical broken bone example, it is important to consider the economic, geographic, and health care markets where this medical event took place. Assuming the patient with the broken bone lives in a mid-size metropolitan area, he or she will likely have a choice of which primary care physician to see for the initial consultation. This primary care physician will have established his or her own network of referral physicians for his use. In this metropolitan area are multiple health care facilities that compete for patients and physician referrals, for broken bone patients as well as the entire spectrum of health and medical conditions. Each provider and facility submits bills to payers for each patient encounter based on the need to cover operating expenses and, in some cases, make a profit.
Managed Care Plans
As medical care technology increased, the costs of providing that care increased correspondingly. In the 1980s, managed care plans and HMOs emerged to contain the rising costs of health care. In many of these plans, the method of payment switched from fee-for-service to a capitation or pre-paid plan. Under fee-for-service, the physician billed each service or medical event based on his or her experience or on what was considered to be 'usual and customary' in his or her practice area. In capitation, a set fee per patient is negotiated in advance of any medical event. A physician provider or hospital knows in advance that the insurance plan or HMO will only pay for the pre-determined contracted amounts for each service delivered or each medical event treated. In this arrangement, the risk of paying for a medical event is now shared between the payer (health plan or HMO) and the provider (physician or hospital).
Under capitation, payers negotiate with individual providers for the best price. In a metropolitan area, providers are in the position of competing to offer the most attractive package of services and pricing to in order to gain market share with payers. Smaller operations, smaller hospitals in particular, found it difficult to compete with larger hospitals for patients and payers. Hospitals with sufficient capital began to buy up smaller hospitals with weaker and less stable fiscal capability in order to...
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