Sir_Excellence

Unit 4: Week 4 - Chapter 9 Outline

CHAPTER NINE: COMPETITION, COOPERATION, AND INTEGRATION

LEARNING OBJECTIVES

After completing this chapter, the reader will be able to

1.   Understand the nature of the competitive forces acting on long-term care organizations.

2.   Define various forms of cooperation and integration.

3.   Discuss the benefits of the various forms of integration.

4.   Identify the components of integrated systems and networks.

5.   Discuss management, financing, and quality issues related to integration.

CHAPTER HIGHLIGHTS

The Environment - the long-term care environment is changing rapidly due to:

·         Increasing number of aged

·         Uncertain reimbursement

·         Desire for consumer choice

Financing Changes

·         Transition from a retrospective payment system

·         The introduction and rapid growth of managed care

Competition

·         Competition is increasing and will continue to do so.

·         Conditions Required for Effective Competition:

·         Influence of Individual Buyers or Sellers – dominance of Medicare and Medicaid, increased influence of managed care.

·         Collusion to Fix Prices or Quantities – government payers clearly in a position to determine prices and quantities.

·         Free and Easy Entry into the Market – the long-term care market is not easy to enter due to regulations.

·         Government-Imposed Restraints - as nongovernment payment sources such as MCOs and private long-term care insurance have gained an increasing portion of the long-term care market, the ability of the government to impose those restraints is being eroded.

·         Information about Price and Quality – providers have not done a good job of getting such information, but it is improving.

Competition: What Has Changed?

·         Increasing number of payment sources

·         Difficult for stand-alone providers to survive

·         Managed care organizations need to contract for some services

·         Public payment sources, particularly state Medicaid agencies, are learning from their private counterparts and are also examining the potential benefits of managed care contracting.

Competition from Other Health Care Organizations

·         Competition coming from other types of providers (e.g., acute hospitals).

·         Hospitals are also competing for market share, may move into long-term care

·         Hospitals are powerful opponents in the competitive long-term care market.

·         They tend to have sound infrastructures, both physically and organizationally.

Effects of Increased Competition

·         Long-term care providers have been forced to wake up and recognize that others are competing for some of their business.

·         One side effect of increased competition has been the increase in the number of multi-facility chains and the corollary decrease in the number of single-site, privately owned long-term care organizations.

Cooperation – not as formal as integration.

·         Types of Cooperation:

·         Transfer agreements with other types and levels of providers

·         Referral agreements

·         Sharing of services

·         Shared purchasing

Encouraged by the “bundling” provisions of the Affordable Care Act.

 

Moving from Cooperation to Integration

·         Begins with informal cooperation and leads to more formal arrangements.

Integration

·         Clarification of Integration Terms

·         Several different versions.

·         “Integrated Health System (IHS)” most common – means formal organization

·         “Integrated Health Network (IHN)” – not as formal as HIS, but more than a cooperative arrangement.

·         Horizontal and Vertical Integration

Horizontal Integration - two or more organizations that provide similar services forming an alliance for their mutual benefit.

·         Vertical Integration - an alliance of two or more organizations providing services that are dissimilar but that are interactive with, and may rely on, each other.

·         Reasons for Joining an Integrated System or Network

·         Economies of Scale – savings by sharing

·         Gaining Market Share – joining a larger, more competitive organization

·         Increased Bargaining Power – strength in numbers

·         Protection from Competitors – strength from affiliation with other organization

·         Integration of the Continuum of Care – benefits for consumers and the system

·         Saves money

·         Improves care

·         Elements of an Integrated Health System (HIS) or Integrated Health Network (IHN)

·         Interentity organization and management

·         Coordination of Care

·         Integrated Information Systems

·         Clinical Information Systems  

·         Management Information Systems

·         Integrated Financing

·         Governance Issues – joining an integrated health system can create issues concerning who governs and how

·         A system board must oversee a conglomeration of member organizations, each with its own unique strengths and weaknesses.

·         Must consider both interests of overall system and individual member organizations.

·         Role of Long-Term Care in Integrated Systems

·         Integration in long-term care is far from mature as a business.

·         It is, however, the way of the future.

LECTURE OUTLINE

A.  Identify learning objectives for the session

B.  Introduce the lecture topic

C.  Discuss the reasons why the long-term care field is experiencing more competition, cooperation, and integration, including:

      1.   The environment

      2.   Financing changes

3.   Competition

D.  Competition. Introduce and define “competition.

E. Conditions. Present and discuss Fuch’s five conditions required for effective competition, and how the long-term care field matches up against them.

      1.   Lack of influence of individual buyers and sellers

      2.   Lack of collusion to fix prices or quantities

      3.   Free and easy entry into the market

      4.   Few governmentally imposed restraints

      5.   Information about price and quality

F.   Sources. Discuss the sources of competition in long-term care.

G.  Effects. Identify and discuss the effects of the increased competition.

H.  Cooperation. Introduce and define “cooperation” including the different types of cooperation.

I.    Integration. Introduce and define “integration” and the various similar terms associated with it, then show how it differs from cooperation.

J.    Explain the difference between horizontal integration and vertical integration.

K.  Identify and discuss the most common reasons for joining an integrated health system or network:

      1.   Economies of scale

      2.   Gaining market share

      3.   Increased bargaining power

      4.   Protection against competitors

L.   Consumer Benefits. Identify and discuss the benefits to consumers of an integrated network or system.

M.  Elements of an HIS or IHN. Discuss Evashwick’s four integrating mechanisms required for effective integration:

      1.   Interagency organization and management

      2.   Coordination of care

      3.   Integrated information systems

      4.   Clinical information systems

5.   Management information systems

6.   Integrated financing

N.  Governance Issues. Discuss the potential governance and/or administration issues involved in integration.

O.  Summarize the discussion, recapping the key points of the lecture

 

VOCABULARY TERMS

Affiliation - association with another person, organization, or establishment.

Affordable Care Act - Passed in 2010 to greatly expand coverage of millions, as well as adding many new mandates and regulations. Also known as “ObamaCare”.

Bargaining power - ability to negotiate from a position of advantage.

Bundling - the ACA created a system of payment bundling where a single entity would receive a sum of money to cover the costs of an episode of care spanning two or more providers

Clinical information systems - information technology applications for management of clinical care.

Collusion - a secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose.

Competition - rivalry between two or more businesses striving for the same customer or market.

Continuous Quality Improvement (CQI) - a form of quality improvement adapted from Total Quality Management (TQM).

Continuum of care - term used to describe the range of services provided to consumers of health care, including preventive care, acute care, and all of long-term care.

Cooperation - association with another business entity for common, usually economic, benefit.

Distinctive competencies - those services or talents that make one organization stand out from others.

Economies of scale - lower costs realized through large scale purchases or contracts.

Health Maintenance Organization (HMO) - an organization that, for a prepaid fee, provides a comprehensive range of health maintenance and treatment services - a form of managed care.

Horizontal integration - integrated health system or network consisting of two or more organizations that provide similar services.

Infrastructure - the basic facilities, services, and installations needed for the functioning of a community or organization.

Integrated delivery system (IDS) - group of providers organized into a system of care.

Integrated health network (IHN) - system of health care containing numerous health care providers working together, but maintaining their individual organizational autonomy.

Integrated health system (IHS) - system of health care containing numerous health care providers organizationally integrated and coordinated.

Integrating mechanisms - elements required for an effective continuum of care.

Integration - organizing of individual provider organizations into a larger organization.

Management information systems (MIS) - application of information technology (IT) dealing with the functions of management.

Merger - the union of two or more commercial interests or corporations into a single entity.

Strategic business unit - semi-autonomous unit or division within an organization, each providing a specific service.

Transfer agreement - an agreement between two providers, usually providing different levels of care, spelling out details of transfers of patients between their facilities.

Vertical integration - integrated health system or network linking of organizations providing different levels of care.