NMS11176 : Hospital Management : Vertically Integrated

Answer

Hospital Management

Introduction

In this project, the chief Financial Officer of a hospital that has been located  in a highly competitive urban area where two competing hospital are located has to take certain management decisions. The urban market is majorly control by two hospitals. This hospital holds 30 percent of total urban market share (Ma et al., 2019). The CFO is asked for the affiliation of salaried physicians for the hospital. Now the hospital is dealing with hired physicians. However, the Medicare and private insurer are pressuring the hospital to acquire its own physicians to deal with the hospital chores. The insurer and the Medicare service providers are seeking for value based reimbursement under ACO contracts. One of the leading hospital has already appointed large physicians in practice.

Vertically Integrated physician practice system in hospitals

The vertical integration of physicians in the hospital sector regarded as the fixed employment of the physicians in lieu of salary. The probable advantages and disadvantages are as follows

Advantages:

In the vertical integration of the hospital and physicians' practice, several advantages will be enjoyed by the hospital.

• The hospital is currently operating in the 30% market share, but it can achieve 100% market share by acquiring large-scale physician practice. This will bebeneficial for the hospital to acquire larger market share (Walker& Walker, 2016).
• Cost control is one of the key advantage is that the vertical integration system.
• In the current environment the Medicare and Private Insurer’s broadly reimburses the health issue expenses. Therefore, it is required for the hospital to implement value-based reimbursement under ACO contracts for the Medicare and private insurer.
• By the use of integration of the many physician and hospital, collaboration and co-ordination will be establish.
• The hospital will gain competitive advantage if they already acquired the large physician in practice, as the rival hospital has already adopted the policy of acquiring the practising physician.
• By the coordination between the physicians' in practice and the hospital, hospital will get access to more patients and develop a larger network in the existing and future market.

Limitations:

The vertical integration of the hospital and physicians' practice will initiate some disadvantages, which are as follows.

• Increase in the work process is a major problem in the vertical integration of the hospital and physicians' practice. When the hospital is acquiring large number of physicians, the organisation process is increased (Iaquinto et al., 2017).
• In the acquisition of the large-scale physicians, the cost of control will be high.
• The investment requirement will be high, as the hospital will not hire the physicians from the same departments. Rather the hospital will hire physician for various departments.
• The increased in differentiated service may diorite the quality of the serviceIn this contextual situation, the major problem is that the competitive companies had already acquired the market share and implemented the vertical integration of the hospital and physicians' practice. Therefore, it is quite difficult for the new company to acquire new physician as well as obtaining larger market share (Mohammed et al., 2015).

Conclusion

In the health care sector, the managers or the decision makers are currently facing difficulties in presence of vertical integration of hospital and physician. It is also concluded that the hospital need to access the market therefore it must consider the relevance of vertical integration of hospital and physician. Without it, the hospital cannot control the market position.

Reference

Iaquinto, A. L., Jancenelle, V., &Macpherson, W. G. (2017). Finance-oriented directors and crisis management: Blissful ignorance in the hospitality industry?. Journal of Hospitality and Tourism Management, 32, 82-88.

Ma, M., Huang, J., Lin, S., & Yang, S. (2019). From finance to marketing: Initial public offering ownership overhang and marketing in the hospitality industry. International Journal of Hospitality Management, 76, 71-82.

Mohammed, I., Guillet, B. D., & Law, R. (2015). The contributions of economics to hospitality literature: A content analysis of hospitality and tourism journals. International Journal of Hospitality Management, 44, 99-110.

Walker, J. R., & Walker, J. T. (2016). Introduction to hospitality management. Prentice Hall.