Incentives for vertical integration in healthcare: The effect of reimbursement systems

Margaret M Byrne, Carol M. Ashton

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

In the United States, many healthcare organizations are being transformed into large integrated delivery systems, even though currently available empirical evidence does not provide strong or unequivocal support for or against vertical integration. Unfortunately, the manager cannot delay organizational changes until further research has been completed, especially when further research is not likely to reveal a single, correct solution for the diverse healthcare systems in existence. Managers must therefore carefully evaluate the expected effects of integration on their individual organizations. Vertical integration may be appropriate if conditions facing the healthcare organization provide opportunities for efficiency gains through reorganization strategies. Managers must consider (1) how changes in the healthcare market have affected the dynamics of production efficiency and transaction costs; (2) the likelihood that integration strategies will achieve increases in efficiency or reductions in transaction costs; and (3) how vertical integration will affect other costs, and whether the benefits gained will outweigh additional costs and efficiency losses. This article presents reimbursement systems as an example of how recent changes in the industry may have changed the dynamics and efficiency of production. Evaluation of the effects of vertical integration should allow for reasonable adjustment time, but obviously unsuccessful strategies should not be followed or maintained.

Original languageEnglish
Pages (from-to)34-46
Number of pages13
JournalJournal of Healthcare Management
Volume44
Issue number1
StatePublished - Jan 1 1999
Externally publishedYes

Fingerprint

Motivation
incentive
Organizations
Delivery of Health Care
Costs and Cost Analysis
efficiency
Integrated Delivery of Health Care
Social Adjustment
Organizational Innovation
manager
transaction costs
Health Care Sector
Research
Cost-Benefit Analysis
Industry
integration strategy
organizational change
costs
reorganization
Incentives

ASJC Scopus subject areas

  • Health(social science)
  • Health Professions(all)

Cite this

Incentives for vertical integration in healthcare : The effect of reimbursement systems. / Byrne, Margaret M; Ashton, Carol M.

In: Journal of Healthcare Management, Vol. 44, No. 1, 01.01.1999, p. 34-46.

Research output: Contribution to journalArticle

Byrne, Margaret M ; Ashton, Carol M. / Incentives for vertical integration in healthcare : The effect of reimbursement systems. In: Journal of Healthcare Management. 1999 ; Vol. 44, No. 1. pp. 34-46.
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