First they were called sanitariums.
Then they became hospitals.
Then some joined to form multihospital systems, which in turn evolved into healthcare systems.
Now they are called integrated delivery networks, integrated delivery systems, community-care networks, organized delivery systems or provider service networks.
No matter what you call them, such systems or networks will continue to grow in size and breadth in 1996. The average not-for-profit system now accounts for more than 10 hospitals, compared with an average of about nine in 1993. Look for that number to keep growing this year.
Despite the well-documented diversification failures of the 1980s, systems are moving back into the insurance arena with HMOs, physician-hospital organizations and risk-sharing direct contracts with employers. Systems are acquiring home health agencies, nursing homes, hospices and alternate-care sites.
Systems also are acquiring primary-care group practices, employing physicians and managing their practices. Systems know that primary care, with its potential for cost savings through preventive medicine, is fast becoming their most important component.
While systems are spending millions of dollars on physicians, buying their loyalty is another question. If systems are to succeed, hospitals and physicians must learn to work together and trust each other, a goal easier said than done.
System executives say they're striving to make their companies into groups of hospitals, doctors, outpatient facilities and insurance-type products tied together through information systems. To complete their circle of care, they will sign contracts with those providers they can't own.
The goal is to provide every type of healthcare service because soon, current wisdom holds, payers are going to give systems a flat fee for covering groups of patients and say, "They're yours, keep 'em healthy."
Until now, systems have experimented with limited capitation for patient groups. But they expect to expand that in the next year or two.
Under capitation, or prepaid care, the more efficient a system can become the more money it will make.
It's a gamble, but payers and large employers are pushing systems in that direction by seeking out such agreements to reduce their health costs.
Of the many challenges ahead for systems in their drive to integrate, the biggest may be a problem of technology: lack of a comprehensive information system that can link clinical outcomes data, patient expense data, medical records and billing across integrated operating units.
To address this deficiency, systems are earmarking between 10% and 30% of their capital expenditures for information system hardware and software. Experts predict a new wave of information technology will soon become available to save the day, but nobody knows exactly when.
Integration of clinical and financial information among operating units is the one clear difference between the 1980s and today. If systems can successfully manage care and costs, the multimillion-dollar losses many experienced 10 years ago may not materialize this time around.