The number of integrated healthcare networks has risen rapidly in the first months of 1995, following last year's surge of mergers and acquisitions within the industry.
There are now about 430 integrated networks, an increase of 69% from December 1994, when 255 networks existed (See chart).
"It is an extremely volatile market," said John Henderson, president of SMG Marketing Group. The Chicago-based company has tracked the number of integrated systems since January 1994.
Henderson predicts that the number of networks will grow 50% during the next year, then growth will level off in 1997.
However, most networks are still just taking baby steps toward true integration.
"In reality, none of the integrated healthcare networks are truly integrated at this time. Most are putting their foot in the water, trying to set up managed-care agreements to garner patients," Henderson said.
By SMG's definition, an integrated network arises when two or more facilities formally agree or plan to share the delivery of health-related services through a single organization. The network is formed with the intent to market itself as one unit to payers.
More than one in five hospitals belong to integrated systems. Hospitals are the primary initiators of integration, leading the formation of networks 73% of the time, SMG found.
The Midwest boasts the most integration efforts, with 104 networks in place, according to SMG. The Northeast region has the fewest, with 67, and the Southwest, West and Southeast have 73, 86 and 99, respectively, according to SMG data.
Some 88% of integrated networks are organized regionally or locally, Henderson said. The rest are mostly statewide networks.
Eventually, such networks may build up purchasing leverage previously held by group purchasing organizations, Henderson said. Integrated systems may align with just one purchasing group, and may purchase higher cost and volume products directly, he said.
Henderson also predicts that integrated networks will want to take on risk as they pick up patients and market share.
Recent growth of integrated healthcare networks
December March April May
1994 1995 1995 1995
Number of networks 255 380 430 435
Hospitals (%) 16.4 22.4 23.9 24.7
Staffed beds (%) 22.2 29.2 31.1 32.6
Total surgeries (%) 30.7 39.5 41.8 43.6
HMOs (%) 6.8 9.6 12.4 12.8
Nursing homes (%) 0.7 1.0 1.0 1.1
Home healthcare (%) 1.3 2.0 2.2 2.3
Alternate care (%) 3.3 4.4 4.9 5.0
Physician centers (%) 3.2 5.6 6.7 6.8
Source: SMG Marketing Grou