The integration of physicians and hospitals is one such step. This merger plan has been devised to salvage the healthcare industry by reducing its costs.
Hospital- Physician integration has been one of the most striking developments in the medical fraternity. By 1998, nearly 66% of the hospitals had or were formulating an integration scheme with physician organizations, nearly twice the proportion in 1993. (Burns et al, 2000). It was believed that combining the hospitals' and the physicians' organizations would not only decline the operational costs, but would also increase the efficiency of the industry. One major reason why professionals in the industry chose to integrate is to deal with manage care associations beneficially. Managed care plans enter into agreements with hospitals individually, where the hospitals are entitled to provide medical services to their customers. The choice of the hospitals they want to enter agreements with is often decided on the basis of the financial statistics. The managed care plans clearly have an upper hand, and they even get discounts from the hospitals. The hospital- physician integration scheme was essentially designed to offset the manage care plans and to extract better economic deals. Therefore, this union was meant to help the hospital-physician groups to have a stronger and more formidable presence in the market.
Also, with the formation of a single entity (i.e. the hospital-physician organizations) the transactional and administrative costs would also decrease. Instead of dealing with two managerial authorities, the patients would have to deal with just one. This would lower costs and thus increase the quality of services. This merger would also lead to a better understanding of the mutual interests of the two groups.
Depending on the range of flexibility, several kinds of integration schemes are available. These include- Independent Physicians Associations (IPAs), Open Physician-Hospital Organizations (OPHOs), Closed Physician-Hospital Organizations (CPHOs), Management Service Organizations (MSOs), and Fully Integrated Organizations (FIOs).
The Independent Physicians Associations (IPAs) are the most flexible of these organizational forms. They don't actually form official organizations, instead they help the physicians enter agreements with managed care plans. The 10% of the hospitals that have adopted this scheme generally do not have risk-based global capitation contracts (Bazzoli et al., 1999/2000)
Fully Integrated Associations (FIAs), on the other hand are the most rigid and closely related entities. They "purchase" both the physician's services and also physical assets. To increase returns, they often relocate their physicians in the developed cities.
Statistics have shown that hospitals, which follow the IPA scheme, have not shown any substantial improvement in the quality of services offered. In fact, the mortality rate actually rose a little. The FIA's, in contrast, have yielded improved results. Their quality has increased without any increase in the costs incurred. Their mortality rate has also gone down.(Cueller and Gertler, 2006) Therefore, the latter organizational plan has