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BUSI 528: STRATEGIV MANAGEMENT AND MARKETING FOR HEALTH
PROFESSIONALS
Abstract
Vertical integration involves the alignment and collaboration of healthcare entities such
as hospitals, clinics, and insurers as well as a continuum of care. This integration aims to
improve coordination, enhance patient outcomes, and streamline operational processes. By
consolidating services and resources, vertically integrated healthcare systems aspire to provide a
more seamless and comprehensive patient experience. The benefits of vertical integration include
improved care coordination, reduced fragmentation, and enhanced communication among
healthcare providers. This approach also has the potential to optimize resource utilization,
leading to increased operational efficiency and cost-effectiveness. Vertical integration enables
healthcare organizations to implement innovative care delivery models, such as accountable care
organizations (ACOs), fostering a more patient-centric and value-driven healthcare ecosystem.
As a healthcare landscape continues to evolve, understanding the nuances of vertical integration
is essential for policymakers, healthcare executives, and stakeholders to make informed
decisions that promote improved patient care outcomes, efficiency, and sustainability in the
healthcare industry.
Keywords: vertical integration, efficiency, sustainability, communication, streamline, hospitals,
collaboration, operational efficiency.
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BUSI 528: STRATEGIV MANAGEMENT AND MARKETING FOR HEALTH
PROFESSIONALS
Vertical integration is a strategy used to incorporate related products or services in an
organization that have already been developed or offered by others in the marketplace
(Berkowitz, 2022). Berkowitz (2022) explains that there are two types of integration strategies:
backward integration and forward integration. Backward integration is often utilized by large
healthcare organizations of medical groups and involves becoming its own supplier (Berkowitz,
2022). Berkowitz (2022) describes forward integration as when an organization offers new
products and services that will be closest to the patient than the existing products or services
(Berkowitz, 2022). According to Post et al. (2018), the hospital – physician vertical integration is
on the rise and have formed closer ties with one another. Amado et al. (2021) suggests that the
vertical integration model stands out due to its straightforward effects on the continuity of care.
A major academic center such as the University of Iowa would utilize backward
integration. A major academic medical center has tertiary services with several intermediaries.
The academic medical center would want to develop a vertical marketing system utilizing
backwards integration due to the services and products needed being farther from the patient.
The academic center may also want to utilize backward integration to take total control over the
entire system to guarantee that the requisite level of professionalism and competency was
accessible to patients at all levels.
A five-person general surgery group would develop a vertical market strategy by utilizing
a forward integration. A smaller surgery group might want to forward integrate with a smaller
hospital in their operating region to accommodate their inpatient volume. The reasoning for this
is because a smaller general surgery group does not have intermediaries between the patients and
instead, they treat patients directly. The smaller general surgery group may work with a
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BUSI 528: STRATEGIV MANAGEMENT AND MARKETING FOR HEALTH
PROFESSIONALS
professional surgical group and utilize them as a referral for their high acuity patients. Because
this is a small group, they would have to rely on contracts to integrate with both the hospital and
the specialty surgical group (Berkowitz, 2022).
A producer of durable medical equipment would utilize backwards integration because
the manufacturer would have several intermediaries between themselves and the patients. For
example, they would supply medical equipment to retailers who would then supply the
equipment to hospitals or medical practices where patients would receive treatment or services
from the supplied medical equipment. The vertical marketing strategy for this producer would
also depend on the company’s size as it may be able to fund is own sales. If the firm became
large enough, it could open its own branch offices around the country and recruit for experienced
salesmen to do direct sales. If the producer didn’t have the finances to build their own office,
they could potentially train agents from other distribution businesses to sell to the buyers
(Berkowitz, 2022).
Biblical Integration
In the context of healthcare, vertical integration refers to the consolidation of various
stages of the healthcare process, from primary care to specialized services, under a single
umbrella. Proverbs 4:7 states “The beginning of wisdom is this; Get wisdom. Though it cost all
you have, get understanding” (NIV, 2020, p. 346). This biblical verse can be integrated by
emphasizing the importance of wisdom and understanding in the healthcare industry. Healthcare
involved a continuum of services, from primary care an diagnostics to specialized treatments.
Vertical integration allows for a comprehensive understanding of this continuum, enabling
healthcare organizations to deliver more coordinated and patient-centered care.
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BUSI 528: STRATEGIV MANAGEMENT AND MARKETING FOR HEALTH
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Resources
Amado, G. C., Ferreira, D. C., & Nunes, A. M. (2022). Vertical Integration in healthcare: What
does literature say about improvements on quality, access, efficiency, and costs
containment? The International Journal of Health Planning and Management, 37(3),
1252–1298. https://doi.org/10.1002/hpm.3407
Barker, K. L. (2020). Niv study bible. Zondervan.
Berkowitz, E. N. (2022). Essentials of Health Care Marketing. Jones & Bartlett Learning.
Post, B., Buchmueller, T., & Ryan, A. M. (2018). Vertical integration of hospitals and physicians:
Economic theory and empirical evidence on spending and quality. Medical Care Research
and Review, 75(4), 399–433. https://doi.org/10.1177/1077558717727834
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