Is vertical integration adding value to health systems?

Abstract

Vertical integration is a concept used by health systems when attempting to achieve economies of scale, greater coordination of services, and improved market penetration. This article focuses on the actual outcomes of utilizing vertical integration in the health field and then compares these findings with those reported in other industries. This analysis concludes that this organizational model does not work particularly well in the health industry, as illustrated by health alliances' poor fiscal performance when they acquire physician practices or when they start their own HMO plans.