Hospitals Industrial Organization Medical Home Public Policy Supply of Medical Services

On the promise and peril of health systems

Integrated delivery networks. IDNs. Accountable Care Organizations. ACOs. Systems of care. Health systems.

Whatever you call them, many health policy experts claim that they are the best way for the U.S. health care system to deliver high quality care in a cost-effective manner. But is that really the case? A commentary by UCSD professor and former AHRQ Director, Richard Kronick in Health Services Research provides a balanced perspective.

First, some of the promise:

  • Potential for productive and allocative efficiency. Health care systems could be helpful for determining which configuration of inputs is able to most efficiently produce a given quantity of high-quality output. In some countries–such as those with a single payer system–the government does this. In the US, with a very disjointed payer system, health systems may be able to coordinate inputs and leverage economies of scale to improve quality and reduce costs.
  • Leverage technology. Electronic health records system implementation have high fixed cost but much lower cost per physician added to the system or per patient treated. Large health systems have the potential to leverage these economies of scale to better incorporate technology into care pathways.
  • Institute best practices. Given their size, they may be able to roll out and train physicians on recent best practices compared to what is the case with smaller practices.
  • Patient-centered outcomes. Health system size may also facilitate the use of patient-centered outcomes for two reasons. The first is that their scale makes investments in data collection of patient-reported outcomes more economical. The second is that a health system will have more patient touchpoints than a single practice and thus patient-centered outcomes are more relevant. If you want to know about patient-centered quality of care, but you are a small specialty practice, your impact on the patient’s experience with the health care system may be marginal, compared to a health system which–in many cases–will be the main organization with whom the patient interacts.

Health systems do bring up a number of concerns however. These include:

  • Added bureaucracy. While the increased size may make investments in quality improvements and EHR more economical, they also risk increasing bureaucracy and increasing administrative cost. Government agencies may like health systems better ability to collect data, but these data collection costs are often non-trivial.
  • Reduced competition may lead to higher prices. Providers may like health systems, because the increase negotiating power with payers. More consolidation and less competition may lead to increased prices. Health systems could also lobby policymakers to make laws more favorable to health systems.
  • Erode professional autonomy. While policymakers may like integrated health systems, physicians themselves may or may not. They may like being salaried and outsourcing administrative tasks to others; on the other hand, they may not like that administrators are telling them how to practice medicine, ostensibly based on best practices.

Another question is: what are health systems? AHRQ’s Compendium of Health Systems is one attempt to classify and identify them. This 2016 snapshot shows that health systems made up 88.2% of beds and employed 44.6% of physicians. By 2018, however, more than half of physicians were employed at health systems.

Yet there is much left to learn. According to Dr. Kronick, there are at least 3 key questions that are still un-answered:

We do not yet have a report card on health system performance that would allow comparison of performance across systems; we do not yet have much empirical evidence about the characteristics of health systems that are associated with high performance, nor of the payment and other accountability mechanisms that lead to performance improvement; and we do not yet know much about what tools and resources systems would need to facilitate improvement.

The commentary, while brief, is an interesting and balanced take on US health systems and well worth a read.


Leave a Reply

Your email address will not be published. Required fields are marked *