Expansion of Hospital Services

Expansion of Hospital Services

Explain how vertical integration can impact a healthcare system.

Vertical integration can impact a healthcare system by improving the efficiency and quality of care. This occurs due to the reduction in transaction costs. For instance, closer connections with hospitals and physicians can improve communication across healthcare settings and reduce uneconomical duplication of diagnostic tests (Heeringa et al., 2020). Vertical integration may also have a negative impact on consumers by allowing physicians and hospitals to increase prices (Grade & Baker, 2019). Contracting physicians or employing them makes hospitals increase their market power by gaining control over a wide range of services or denying their rivals a source of clients or somewhere to send their referrals. Vertical integration may additionally increase the incentives of physicians to supply unnecessary treatments if the treatments are used to pay the inducements for inappropriate referrals. Our assignment writing help is at affordable prices to students of all academic levels and academic disciplines.

Explain how a hospital’s expansion into other services can strengthen its financial standing.

Hospital’s expansion into other services can strengthen their financial standing by allowing the hospitals to experiment with new innovative forms of delivering healthcare services, such as introducing accountable care. Hospitals can also integrate patient care by introducing new healthcare models, the ability to take various financial risks connected to overseeing patient groups, and the ability to continue offering care to patients in the community (Lange & Løvseth, 2020). This plays a significant role in increasing profit, thus providing a solid financial standing for the hospital.

Explain how a hospital’s expansion into other services can have a negative impact on a system by operating outside the scope of the hospital’s mission statement.

A hospital’s expansion to other services can have a negative impact on a system by operating outside the scope of the hospital’s mission statement in different ways. To begin with, the hospital may lose goodwill from the community due to job losses and the possibility of lower quality care, thus making the hospital lose market share, which translates to reduced profitability (Heok Lee, 2018). Hospitals may also be impacted negatively by creating redundancy among employees. This may significantly impact the employees’ productivity, hence lowering the hospital’s overall performance.

References

Grade, M. M., & Baker, L. (2019). Vertical integration among health care providers. The New Palgrave Dictionary of Economics, 1-10. https://doi.org/10.1057/978-1-349-95121-5_3070-1

Heeringa, J., Mutti, A., Furukawa, M. F., Lechner, A., Maurer, K. A., & Rich, E. (2020). Horizontal and vertical integration of health care providers: A framework for understanding various provider organizational structures. International Journal of Integrated Care, 20(1), 2. https://doi.org/10.5334/ijic.4635

Heok Lee, Y. (2018). Costs and benefits of vertical integration. Vertical Integration and Technological Innovation, 8-18. https://doi.org/10.4324/9780429456589-2

Lange, A. H., & Løvseth, L. T. (2020). Integrating the organization of health services, worker wellbeing and quality of care: Towards healthy healthcare. Springer Nature.

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The past decade has seen profound changes in how the hospital industry has organized itself, including the rising importance of hospital systems. Theoretically, system consolidation can have positive effects from improved efficiency and quality or negative effects from greater market power. Furthermore, these developments have led to hospital bankruptcies and closings, reductions in bed complements, and mergers and takeovers, as well as the formation of an ever-increasing number of hospital networks.

Expansion of Hospital Services

In this module, you studied how vertical integration can impact a healthcare system. In your opinion, should hospitals expand into other services in order to strengthen their financial standing, or is this a method of “self-referral,” reaching out for income-producing areas that are outside the realm of the hospital’s mission statement?

Written in APA format, address the following:

Explain how vertical integration can impact a healthcare system.
Explain how a hospital’s expansion into other services can strengthen its financial standing.
Explain how a hospital’s expansion into other services can have a negative impact on a system by operating outside the scope of the hospital’s mission stat.