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Integration: the firm and the health care sector

Published online by Cambridge University Press:  23 April 2014

Miriam J. Laugesen  and
George France
Miriam J. Laugesen*
Affiliation:
Department of Health Policy and Management, Mailman School of Public Health, Columbia University, USA
George France
Affiliation:
Institute for the Study of Regionalism, Federalism and Self-Government, National Research Council, Italy
*
*Correspondence to: Miriam J. Laugesen, Assistant Professor of Health Policy and Management, Mailman School of Public Health, Columbia University, 600 W. 168th St, MSPH Box 14, New York, NY 10032, USA. Email: [email protected]
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Abstract

Integration in health care is a key goal of health reform in United States and England. Yet past efforts in the 1990s to better integrate the delivery system were of limited success. Building on work by Bevan and Janus on delivery integration, this article explores integration through the lens of economic theories of integration. Firms generally integrate to increase efficiency through economies of scale, to improve their market power, and resolve the transaction costs involved with multiple external suppliers. Using the United States and England as laboratories, we apply concepts of economic integration to understand why integration does or does not occur in health care, and whether expectations of integrating different kinds of providers (hospital, primary care) and health and social services are realistic. Current enthusiasm for a more integrated health care system expands the scope of integration to include social services in England, but retains the focus on health care in the United States. We find mixed applicability of economic theories of integration. Economies of scale have not played a significant role in stimulating integration in both countries. Managerial incentives for monopoly or oligopoly may be more compelling in the United States, since hospitals seek higher prices and more leverage over payers. In both countries the concept of transaction costs could explain the success of new payment and budgeting methods, since health care integration ultimately requires resolving transaction costs across different delivery organizations.

Type
Special Section
Information
Health Economics, Policy and Law , Volume 9 , Issue 3 , July 2014 , pp. 295 - 312
Copyright
© Cambridge University Press 2014 

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