DHA 711 Week 3 Analysis of a Health System's Structure Example

Eleven Hospitals, 380 Employed Physicians and a Home Health Agency: Analyzing the Horizontal and Vertical Structure of a Regional Network

[Student Name]

University of Phoenix

DHA/711: Administration of Complex Health Care Systems

Week 3 Assignment

[Instructor Name]

[Date]

The network, its facilities, physician employment, service lines and market data are composites written for a model paper; research findings come from the sources cited.

A 68-year-old farmer with heart failure illustrated the network's structure better than any chart. His rural clinic, owned by the network, referred him to the academic center's cardiology service, also owned by the network. After a hospital stay, he went home with the network's home health agency. Yet his clinic physician did not learn of the admission for four days, the home health nurse could not see the cardiologist's medication changes and he was readmitted within three weeks. Every organization he touched belonged to the same system, but his care was not integrated. This paper analyzes the network's structure to understand why.

Ownership and Facilities

The network owns eleven hospitals in three tiers: an 800-bed academic medical center, three regional hospitals of 150 to 300 beds and seven community and critical access hospitals, four of them rural. It also owns 40 primary and specialty clinics, a home health agency, two ambulatory surgery centers and a minority stake in a regional Medicare Advantage plan. Total employment exceeds 22,000.

Horizontal Integration

Horizontal integration refers to combining organizations at the same stage of care, in this case hospitals. The network grew through five acquisitions and three affiliations over twelve years. Horizontal integration gives the network scale in purchasing, bargaining with insurers and recruiting specialists, and it allows patients to move among hospitals by acuity.

Vertical Integration With Physicians

Vertical integration combines organizations at different stages of care. The network employs 380 physicians, about 55% of those practicing in its service area, and has affiliation agreements with 150 more in independent groups. Employment rose sharply after the network acquired three large practices, including cardiology and orthopedics.

Vertical Integration Beyond Physicians

The network's home health agency, surgery centers and Medicare Advantage stake extend vertical integration into post-acute care, outpatient procedures and insurance. It does not own nursing homes and relies on independent facilities for post-acute placement.

Physicians Outside the Network

The 150 affiliated independent physicians complicate the picture. They refer to network hospitals but use different record systems and are not bound by network protocols. Some compete with network-employed physicians for patients. Their relationship with the network rests on contracts and goodwill rather than ownership, and several said they felt pressured to sell their practices. Structural analysis must include them, because many patients move between employed and independent physicians.

Coordination Mechanisms

Common ownership does not coordinate care by itself. The network's coordination mechanisms include a shared electronic health record now live in eight of eleven hospitals and most clinics, three clinical service lines, cardiology, oncology and orthopedics, a care management program for high-risk Medicare patients and a network-wide quality committee.

Evidence on Vertical Integration

Evidence raises questions about what vertical integration delivers. A review that brought together economic theories of vertical integration and 15 empirical studies of its effects found that hospital-physician integration raises concerns about anticompetitive behavior, spending increases and uncertain effects on quality; the authors found some support for vertical foreclosure as an explanation and concluded that integration poses a threat to the affordability of health services (Post et al., 2018).

Evidence on Concentration and Quality

Market concentration also matters. Analyzing 29 quality measures reported to Hospital Compare from 2008 to 2015, researchers found that vertical integration between hospitals and physicians had limited effects on a small subset of measures, while increased hospital market concentration was strongly associated with reduced quality on all 10 patient satisfaction measures (Short & Ho, 2020). Owning more of the market did not make patients happier with their care.

Reading the Evidence for the Network

The network's physician employment and regional dominance fit the patterns the research describes. Commercial insurers report that network prices have risen faster than regional averages since the practice acquisitions, and patient experience scores at acquired hospitals have not improved. The evidence does not prove the network's structure causes these trends, but it warns against assuming integration benefits patients.

Integrated Care From the Patient's Perspective

Kodner and Spreeuwenberg argue that integrated care needs conceptual clarity and a patient-centered meaning: integration should be judged by whether it creates connectivity, alignment and collaboration in care that patients experience, across funding, administrative, organizational, service delivery and clinical levels (Kodner & Spreeuwenberg, 2002). The farmer's story shows that the network is integrated administratively and financially more than clinically.

Governance of the Structure

The network is governed by a system board with subsidiary boards at each hospital, which approve local budgets and medical staff matters but not major capital or service decisions. Service lines report to system vice presidents, creating a matrix in which hospital presidents and service line leaders share authority. Staff describe the matrix as confusing, particularly for rural hospitals where one person often holds several roles.

Where the Structure Helps

The structure helps in several ways. Scale allows specialists to hold outreach clinics in rural hospitals. The shared record, where live, lets clinicians see results across sites. Service lines have standardized protocols for heart attack and stroke. Capital from the network rebuilt a rural emergency department.

Where the Structure Hinders

The structure also hinders. Three hospitals still use a different record system. Hand-offs between hospital, clinic and home health rely on faxes and phone calls. Service lines are organized around the academic center, leaving rural clinicians outside decisions. And the lack of nursing home partnerships delays discharges.

The Farmer's Readmission Revisited

Each gap in the farmer's care maps to a structural weakness: no automatic notification to his clinic, no shared medication list with home health and no care manager assigned because he was not in the high-risk program. The organizations were owned together but not connected where it mattered for him.

Comparing With Peer Networks

The network is not unusual. Most consolidated systems in the region own several hospitals and employ a majority of local physicians, and several have insurance partnerships. What distinguishes stronger performers, according to network leaders who have studied them, is not how much they own but how well they connect clinicians across sites through shared records, common protocols and care managers who follow patients.

Implications for Cost, Quality and Access

The structure may raise costs through market power while delivering uneven quality gains, and it improves access to specialists in rural areas while concentrating decisions at the center. Structural analysis suggests the network's next investments should target clinical integration rather than further acquisitions.

Recommendations

The network should complete the shared record across all hospitals, automate admission and discharge notifications to primary care, extend care management to all patients with heart failure and similar conditions, include rural clinicians in service line governance, build formal partnerships with nursing homes and monitor prices and patient experience after acquisitions.

Conclusion

The network is horizontally and vertically integrated in ownership, with eleven hospitals, 380 employed physicians and post-acute and insurance holdings. Evidence suggests such integration often raises prices without clear quality gains, and concentration may lower patient satisfaction. Judged from the patient's perspective, as integrated care theory recommends, the network's structure has not yet produced connected care. Investments in clinical integration, not further ownership, are the priority.

References

Kodner, D. L., & Spreeuwenberg, C. (2002). Integrated care: Meaning, logic, applications, and implications. A discussion paper. International Journal of Integrated Care, 2(4), Article e12. https://doi.org/10.5334/ijic.67

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

Short, M. N., & Ho, V. (2020). Weighing the effects of vertical integration versus market concentration on hospital quality. Medical Care Research and Review, 77(6), 538-548. https://doi.org/10.1177/1077558719828938