Integrated healthcare delivery is in danger of becoming to the 1990s what diversification was to the 1980s-a buzzword with little substance. Despite all the talk and the flurry of consolidations, the effort to create organized, cost-effective networks of care is fraught with obstacles.
In the most recent example, three of Kentucky's largest healthcare systems last month dissolved a joint venture to create a statewide integrated delivery system. Louisville, Ky.-based Univa Health Network stumbled over issues of physician control, a common occurrence in such ventures. And it was a costly fumble-this year alone, the network's hospital sponsors were pouring $4.5 million into the effort.
As one former insider said: "The bottom line was Univa was very expensive; there were no results and no lives covered."
The challenges Univa faced were not unique. Earlier this year, two of the largest hospital systems in Indianapolis dissolved their network after being unable to settle on a leadership structure. Although discussions have resumed between St. Vincent Hospital and Health Care Center and Community Hospitals of Indianapolis, Community now is weighing other alternatives, including a partnership with an investor-owned chain.
Contrary to much of the industry rhetoric about how integrated health systems reduce costs, often they result in added overhead to support enormous network bureaucracies. This is a misguided effort to expand institutional market share and control managed-care contracting.
A recent analysis of the 100 top integrated delivery systems by St. Anthony Publishing shows hospital inpatient care is the largest source of revenues for most integrated delivery systems-and clearly a source they fervently wish to protect. Of about $82 billion per year in gross revenues for the 100 systems, about 48% is generated by hospitals.
Some have touted the virtual healthcare organization-which allows hospitals to achieve the benefits of integration without owning all the assets. But there are as many failures as successes among virtual enterprises. It's increasingly apparent that organizational structure alone is not the answer.
To triumph, strategic alliances require groups of physicians, nonphysician providers and payers working under aligned incentives-but under a single point of accountability. The primary goal must be squeezing costs from the system. Few organizations have achieved these goals, but only those that do will survive the coming shakeout.