As federal regulations and payment shifts from a fee-for-service model to population
health management systems, hospitals are consolidating or becoming part of larger
systems that cover geographic expanses. Further, health systems are restructuring to
provide a range of pre- and post-acute care services.
Ownership of Healthcare Organizations
Ownership can be either private or government, voluntary (not for profit) or investor
owned (for profit), and sectarian or nonsectarian (see Figure 2-4). Private organizations
are usually owned by corporations or religious entities, whereas government
organizations are operated by city, county, state, or federal entities, such as the Indian
Health Service. Voluntary organizations are usually not-for-profit, meaning that surplus
monies are reinvested into the organization. Investor-owned, or for-profit, corporations
distribute surplus monies back to the investors, who expect a profit. Sectarian
agencies have religious affiliations.
Healthcare Networks
Integrated healthcare networks originally emerged as organizations sought to survive
in today’s cost-conscious environment. The results of the Affordable Care Act
have led to even further integration as the health of populations must not be managed
across the continuum of care services (Soto, 2013). The earliest definition for population
health was based on health outcomes distributed over a group of individuals.
Today this includes interventions around lifestyle, prevention, and risk avoidance, all
aimed at reducing the need for acute care services. Integrated systems encompass a
variety of model organizational structures, but certain characteristics are common.
Network systems provide the following:
• A continuum of care
• Geographic or population coverage for the buyers of healthcare services
• Acceptance of the risk inherent in taking a fixed payment in return for providing
healthcare for all persons in the selected group, such as all employees of one
company
To provide such services, networks of providers evolved to encompass hospitals
and physician practices. Most important, the focal point for care is primary care
PRIVATE (NONGOVERNMENT) OWNERSHIP –
. – Sectarian ———1
Roman Catholic,
Salvation Army,
Lutheran, Methodist,
Baptist, Presbyterian,
Latter-day Saints, Jewish
Voluntary ——1
(not for profit) . – – – – Community
, – –
‘ – Nonsectarian —–1 Industrial (railroad,
lumber, union)
‘—-I Kaiser-Permanente Plan
Shriners hospitals
‘ – –
Investor– {ndividual owner – – – {Single hospital
owned partnership (Investor-owned
(for profit) corporation hospitals)
GOVERNMENT OWNERSHIP –
Federal ——1
Department of
Defense
Department of
Veterans Affairs
Department of
Health and
Human Services
Department of
Justice-prisons
‘ – –
—-CArmy
Navy
Air Force
- [
Public Health Service
ndian Health Service
Other
—-CLong-term psychiatric, chronic,
State and other
State university medical centers - {
Hospital district or authority
Local County
City-county
City
Figure 2-4 Types of ownership in healthcare organizations.
From Longest, B. S., Rakich, J. S., & Darr, K. (2000). Managing Health Services Organizations and Systems
(4th ed.). Baltimore: Health Professions Press, p. 173. Reprinted by permission.
and care management rather than using the hospital for the continuum of services.
The goal is to interact with and keep patients in the setting that incurs the lowest cost,
promotes health, and reduces expensive hospital stays. A variety of other arrangements
have emerged, varying from loose affiliations or collaborations between hospitals
and hospital systems to complete mergers of hospitals, clinics, and physician
practices. As changes in healthcare reimbursement unfold, nurses are playing
expanded roles in primary care, transitional care, and community-based wellness
initiatives.
Designing Organizations 25
26 Chapter 2
Acute care hospital
Long-term care facility
Home health agency
Ambulatory care clinic
Sports medicine clinic
Hospice care
Figure 2-6 Vertica I
integration.
Interorganizational Relationships
At the onset of this chapter, the reasons why organizations form and re-form were
addressed. With increased competition for resources and public and governmental
pressures for better efficiency and effectiveness, organizations are choosing to establish
expanded relationships with one another for their continued success. Multihospital
systems and multiorganizational arrangements, both formal and informal, are
exploring their mission, purpose, and goals, and whether or not alignments through
new mechanisms are beneficial.
Arrangements between or among organizations that provide the same or similar
services are examples of horizontal integration. For instance, all hospitals in the network
provide comparable services (see Figure 2-5).
Hospital
~
Hospital
~
Hospital – Hospital – Hospital – Hospital
~
Hospital
A B C D E F G
Figure 2-5 Horizontal integration.
Vertical integration, in contrast, is an arrangement between or among dissimilar
but related organizations to provide a continuum of services. An affiliation of a health
maintenance organization with a hospital, pharmacy, and nursing facility represents
vertical integration (see Figure 2-6).
Numerous arrangements using horizontal and vertical integration can be found
today. Examples of such arrangements include affiliations, consortia, alliances,
mergers, consolidations, and agencies under the umbrella of a corporate network
(see Figure 2-7).
I Corporate board I
I
I I I I I I I
Imaging Home care
Medical Skilled Ambulatory
Long-term
Hospital group nursing surgical
center services
practice facility center
care
Figure 2-7 Corporate healthcare network.
Diversification
Diversification is the expansion of an organization into new arenas. It provides
another strategy for survival in today’s economy. Two types of diversification are common:
concentric and conglomerate.
Concentric diversification occurs when an organization complements its existing
services by expanding into new markets or broadening the types of services it currently
has available. For example, a children’s hospital might open a daycare center for
developmentally delayed children or offer drop-in facilities for sick child care.
Conglomerate diversification is the expansion into areas that differ from the original
product or service. The purpose of conglomerate diversification is to obtain a source of
income that will support the organization’s product or service. For example, a longterm
care facility might develop real estate or purchase a company that produces durable
medical equipment.
Another type of diversification common to healthcare is the joint venture. A joint
venture is a partnership in which each partner contributes different areas of expertise,
resources, or services to create a new product or service. In one type of joint venture,
one partner (general partner) finances and manages the venture, whereas the other
partner (limited partner) provides a needed service. Joint ventures between healthcare
organizations, physicians, researchers, and others are becoming increasingly common.
Integrated healthcare organizations, hospitals, and clinics seek physician and/ or practitioner
groups they can bond (capture) in order to obtain more referrals. The healthcare
organization as financier and manager is the general partner, and physicians are
limited partners.
Managed Healthcare Organizations
The managed healthcare organization is a system in which a group of providers is
responsible for delivering services (that is, managing healthcare) through an organized
arrangement with a group of individuals ( e.g., all employees of one company, all
Medicaid patients in the state). Different types of managed care organizations exist:
health maintenance organizations (HMOs), preferred provider organizations (PPOs),
and point-of-service plans (POS).
An HMO is a geographically organized system that provides an agreed-on package
of health maintenance and treatment services provided to enrollees at a fixed
monthly fee per enrollee, called capitation. Patients are required to choose providers
within the network.
In a PPO, the managed care organization contracts with independent practitioners
to provide enrollees with established discounted rates. If an enrollee obtains services
from a nonparticipating provider, significant copayments are usually required.
Point-of-service (POS) is considered to be an HMO-PPO hybrid. In a POS, enrollees
may use the network of managed care providers to go outside the network as they
wish. However, use of a provider outside the network usually results in additional
costs in copayments, deductibles, or premiums.
Accountable Care Organizations
Effective January 2012, accountable care organizations have been able to contract with
Medicare to provide care to a group of Medicare recipients (Ansel & Miller, 2010).
Strong incentives to reduce cost, share information across networks, and improve
quality are included in the provisions for reimbursement.
An accountable care organization (ACO) consists of a group of healthcare providers
that provide care to a specified group of patients. Various structures can be
used in ACOs, from loosely affiliated groups of providers to integrated delivery systems.
An ACO is more flexible than an HMO because consumers are free to choose
providers from outside the network. Cognizant of the potential for Medicare contracts
and, later, reimbursement by other third-party payers, healthcare providers
and organizations are scrambling to establish collaborative arrangements and
networks.
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