DEFINITION OF INTEGRATED DELIVERY SYSTEMS – Class 8

Integrated Delivery System (“IDS”) or Integrated Health Care Delivery System

An integrated delivery system (IDS) also referred to as an integrated health care delivery system is a generic term referring to at least a joint effort of physician and hospital integration for a variety of purposes such as to access the market on a broad basis, optimize cost and clinical outcomes, accept and manage a full range of financial arrangements to provide a set of defined benefits to a defined population, align financial incentives of participants (including physicians), and operate under a cohesive structure.

There are various levels and types of integration, such as hospitals merging with hospitals and physicians aligning with physicians and hospitals and physicians affiliating. Additional services such as home health care, long-term care facilities, pharmacies, and more can be added to result in a continuum of care. A fully integrated delivery system is one that unites a financing group with all providers. The system is built on a foundation of primary care, and all facets of it operate under capitation, so everyone involved shares risk. The strategy of integrated delivery systems is to coordinate the seamless delivery of high-quality healthcare services over the continuum of care.

“Four P’s” Principles in Marketing Applied to Healthcare Industry:

  • Product
  • Place
  • Price
  • Promotion

An example of the goal of integrated delivery systems is illustrated in the following advertisement by Northwestern HealthCare: “Northwestern HealthCare because performance is what counts. There’s been a lot of discussion lately about managing health care. Many health care systems are promising everything to everybody. But you know there is no miracle cure, no silver bullet, to the challenges ahead. What counts is performance, commitment, and a real track record. Smart people and dedicated physicians working together to create a better way. At Northwestern Healthcare, we’re the recognized health care leader delivering good health to more individuals and families annually than any other health care system in the nine-county Chicago region. Our geographic coverage links more than 4,000 physicians, nine institutions and 50 community-based facilities. We have the people, the programs and the ability to provide high-quality and cost effective health care solutions that are tailored to meet your specific needs – whether individual, community, health plan, or employer. Northwestern Healthcare. Your partner in good health. Children Memorial Medical Center, Evanston and Glenbrook Hospitals, Highland Park Hospital, Ingalls Health System, Northwest Community Healthcare, Northwestern Memorial Hospital, Silver Cross Hospital, Swedish Covenant Hospital, and Northwestern University Medical School is affiliated with Northwestern Healthcare.

Another example of integrated delivery systems involves competitive prices with consistent level of quality. In analyzing the healthcare delivery system, “quality” healthcare is expected to be given at all times to the patients. This leaves the providers looking for ways to distinguish themselves, perhaps by price, or by specific terms of quality such as being specialized in a certain field of medicine.  Principles in Marketing are being applied to the healthcare industry.  Providers are using the marketing techniques of of the “four P’s”: Product, Place, Price, and Promotion.

The University of Chicago Hospitals attempts to distinguish itself by quality by advertising that it was the only one hospital in Illinois that made the U.S. News & World Report’s list of “the best of the best” hospitals in America. Also, it distinguishes itself by specialty by advertising that it was ranked highest in Illinois for cancer, endocrinology, gynecology, digestive disorders and heart.

Columbia/HCA might be considered by some to have attempted to be the “Wal-Mart of healthcare” because it attempted to be a chain that uses volume buying, strict cost controls, full integration, and size to bring the public a complete range of services at a decent quality. Columbia/HCA’s strategy included: (1) buying up hospitals, surgicenters, and other providers within a given area to put together a seamless, integrated system; and to (2) add other providers through joint venture or management contracts with the goal that no doctor or patient should have to go to the competition because the Columbia/HCA facility is too far away, does not have the skills or equipment, is too low-quality, or is too high priced.

There are “big organization/big business” type of concerns with companies like Columbia/HCA where people are afraid because these type of companies are big and acquisitive. There is a lot of change going on in the health care delivery system marketplace. A lot of this change is like the “domino effect” where the next guy is doing it so you, doctor or hospital better do it, or you’ll be left out in the cold. There has been a trend for doctors and hospitals to align, and that everyone has to be flexible enough for change, such as to create another insurance type product that may be totally different than what you just created, because things could very likely change very rapidly.

A. FOUR STAGES OF INTEGRATION AND BUILDING BLOCKS

Integrated delivery appears to be the direction healthcare organizations are heading. Finding a model that works involves experimentation because there seems to be no universal model of integrated delivery systems. It has been said that “When you’ve seen one, you’ve seen one.” A fully integrated delivery system is one that unites a financing group with all providers from hospitals, clinics, and physicians to home care and long-term care facilities to pharmacies. Integration is being driven by the need to bring all the components of the delivery system together to create a single point of accountability.

Barriers to Integration may include: Failure to understand the new core business (Primary care), Inability to overcome the hospital paradigm (system strategy), Inability to convince the “cash cow” to accept systems strategy (must support system-wide strategy), Inability of the board to understand the new healthcare environment (board must understand and support system strategy ), Ambiguous roles and responsibilities, Inability to “manage” managed care, Inability to execute the strategy, Lack of strategic alignment (focus on such issues as customer satisfaction, market demand and community health status).

According to Bartling, the four stages of integration are:

Stage 1: Fee for Service and Discounted Care – patients are not limited in their choice of providers, may be some horizontal integration, linking hospital to hospital and physician to physician;

Stage 2: Managed Payment – patient choice becomes more limited, integration is more sophisticated linking hospitals or HMO’s to physicians;

Stage 3: Organized Care – providers share incentives and risks, often under capitated contracts, prices are defined by the market rather than by providers, focus is on continuum of patient care to ensure that patients receive best possible care in most cost effective manner, integration becomes more vertical, linking all providers – from physicians to hospitals to long-term organizations;

Stage 4: Accountable Care – where market, payers and providers are aligned, emphasis of care is preventative since providers are accountable for health status of the people they serve, outcomes are measured and reported, incentives to do the “wrong thing” are eliminated since providers will not want to incur the cost of unnecessary or repetitive procedures.

An article describes the building blocks of integration as follows:

Level 1:     Physician leadership – physician decisions drive 80% of all healthcare expenditures, Primary care network, Information systems (electronic data networks to transmit healthcare information throughout the community and electronic claims processing to accelerate the process), Re-engineering and CQI (organized to measure and report on such indicators of quality as patient’s access to healthcare services, patients’ satisfaction with service delivery, actual utilization of healthcare resources, and financial performance under managed care contracts); Continuum of Care (so patients can move smoothly from one site of healthcare service to another within the system, an organized management function must track the cost and quality of care in each site and coordinate the movement of patients and resources across all sites;

Level 2:     Teleservices – to reduce inappropriate demand for services by identifying problems in healthcare delivery by regularly monitoring patient satisfaction, by providing information and advice concerning the efficient and appropriate use of healthcare resources through telecommunications based triage system and enhancing access to providers throughout the integrated delivery system, improve health status by reminding patients to keep their appointments with providers, reinforcing compliance with prescribed healthcare regimens and encouraging participation in health promotion and disease prevention programs; Outcomes management (defining clinical practice patterns that improve patient outcomes and reduce the variation in clinical management of patients), Regional alliances (consolidation of providers into regional networks such as between urban medical centers and suburban and rural hospitals to reduce excess capacity and duplicate services and technology, improve access to specialty services, and achieve economies of scale in acquiring supplies and sharing equipment.

Level 3:     Empowered consumers – keep to minimum the number of times patients must be re-treated because they failed to comply with prescribed regimens or must be treated in high-cost acute settings because they did not address a disease in its early stage, adopt the concept of patient-centered care; Prevention – to understand how important preventive care efforts can be which includes wellness and fitness programs for employers, industrial injury medicine and rehabilitation services, workers’ compensation management and community health outreach, and people – empowering the people involved in the healthcare delivery system to be able to act in a positive, proactive manner to manage costs and quality under fixed, capitated reimbursement.

B. EFFECTIVENESS OF INTEGRATION

Reasons integration is considered cost effective include: alignment of financial incentives (rather than competing for dollars from the same capitation pie), less duplication of equipment and services, less inappropriate and unnecessary care, lower malpractice premiums, more cost-effective mix of physicians, less use of inpatient hospital days, more efficient use of assets, lower premiums to members.

Regarding quality, few healthcare organizations can back up their claims of higher quality and better medical outcomes with hard data. Integrated healthcare systems make healthcare more accessible by making it more convenient, such as providing more primary-care satellite offices, smoother patient transitions between physician offices and other healthcare facilities, longer office hours and greater use of minor emergency centers. As far as return on investment, several factors are involved in analyzing the economic costs versus benefits, such as required investment, risk factors, benefits.

One article looked at how New York hospitals are scrambling to find new pipelines for patients by going to HMO’s, insurers, smaller hospitals, clinics and doctor groups. The goal is to maintain and build up patient volume. Competition is fierce and people who used to be colleagues are now either partners or competitors. Hospital strategies to build up bigger patient bases include: buy smaller hospitals or larger doctor’s offices outside the New York city so doctors refer patients to hospital, form affiliations, form loose alliances to offer a wide range of services, locations and medical specialization to HMO’s that control the gates to so many patients. Hospital may offer: low interest loans, consultations with world-renown specialists, prestige and academic posts for staff members, use medical center laboratory and radiology services at reduced rates, management and professional seminars.

Questions to ask to analyze the performance of an integrated primary care network include: (1) Does the healthcare organization have a clear vision of what the network should accomplish? (2) Are expectations and performance objectives for the network well articulated and realistic? (3) Are management staff and support systems adequate to accomplish objectives? (4) Is the network’s performance properly measured? (5) Does the healthcare organization have methods to reverse any adverse trends identifies?

Primary care networks are evolving, currently, the preferred system includes base salaries with incentive bonus opportunities. Base salaries from $90,000 to $130,000 are becoming common with bonus potential at levels equivalent to 25 % to 35% of the base. When performance does not meet expectations, executives should not necessarily abandon their primary care strategy, rather they should examine its execution.

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