Assessing the Extent of Integration Achieved Through Physician-Hospital Arrangements

Abstract

EXECUTIVE SUMMARY In this article we examine management service organizations (MSOs), physicianhospital organizations (PHOs), hospital-affiliated independent practice associations (IPAs), and hospital-sponsored “group practices without walls” (GPWWs) that allow physicians to retain their practices and link hospitals and health systems to physicians through contractual arrangements. Also examined were medical foundations (MFs), integrated salary models (ISMs), and integrated health organizations (IHOs) that own the physical assets of physician practices and contract with payors for physician and hospital services. The research provides several new insights for understanding the structure and process of physician-hospital integration. It was found that the extent of processual integration in physician-hospital organizational arrangements can be measured along six dimensions: administrative and practice management services; physician financial risk-sharing; joint ventures to create new services; computer linkages; physician involvement in strategic planning; and salaried physician arrangements. These dimensions are consistent with the conceptual and empirical dimensions developed by others. These findings refute the notion raised by some industry observers that the new physician-hospital organizational models simply formalize integrative activities already in place. Earlier studies from the 1980s reported that hospitals integrated physicians through involvement in governance, capital planning, and the provision of practice management services. In contrast, we found that current integration efforts include not only these dimensions but clinical integration and economic involvement. The research found differences in the degree of integration achieved across organizational models, but these differences did not conform to expectations that centralized ownership implied greater success in integration. MSOs, which do not involve the centralization of ownership or decision making, achieve levels of integration comparable to MFs, ISMs, and IHOs. This finding suggests that contractual models of physician-hospital integration may achieve similar organizational objectives as ownership models. The research focused on the importance of integrative processes because simply creating structures does not guarantee achievement of integration. The imbedded activities that occur within these organizations are essential ingredients for integration to develop, take hold, and grow. Because it has been shown that different models accomplish different goals, hospital and health system executives may need to implement a menu of physician arrangement options to accomplish their objectives. These findings will assist healthcare executives with identifying the specific integration strategies they need to achieve their organizational objectives.

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