BUSI 691 Week 4 Discussion Board Forum 2 Example

Discussion Board Forum 2: Strategic Alternatives and Growth Strategies in Health Care

BUSI 691 Healthcare Administration Capstone, Discussion Board Forum 2

Thread by [Student Name]

The health system, the physician group and the other groups are composites; the textbook, Scripture and the peer-reviewed sources cited are real.

Our group examined a decision facing Summit Health, a three-hospital regional system that has been approached by Valley Family Physicians, a 30-physician independent primary care group whose senior partners want to retire and sell. Summit's leaders worry that if they do not buy the practice, a competing system will, and the referrals Valley's physicians send to Summit's specialists and hospitals, worth an estimated $38 million a year in downstream revenue, could move with them. The board has asked whether acquisition is the right strategy.

Walston (2018) describes several strategic alternatives for growth, including internal development, acquisition, joint ventures and alliances, and explains that each offers a different balance of control, cost and risk. Acquisition provides control quickly but requires capital and can create integration problems, while alliances and networks require less investment but depend on trust and shared incentives. Vertical integration, in which an organization acquires suppliers or customers along the chain of care, is often justified by claims of better coordination. Walston also cautions that strategy should be judged by whether it creates value for the people served, not only for the organization pursuing it. Our group therefore compared acquiring Valley with forming a clinically integrated network in which Valley stays independent but shares data, care protocols and financial incentives with Summit.

The evidence on acquisition is not encouraging for patients or payers. Capps et al. (2018) studied hospital acquisitions of physician practices from 2007 to 2013 and found that, once a hospital owned the practice, the acquired physicians' services were priced 14.1% higher on average, with close to half the jump coming from billing the services under hospital payment rules. Hospitals holding more of their local inpatient business extracted bigger increases, and integrating primary care physicians raised enrollee spending by 4.9%. Post et al. (2018), weighing fifteen empirical papers on hospitals that bring physicians in-house, concluded that it poses a threat to affordability, finding some support for the theory that hospitals use integration to steer patients and limit rivals' access, while evidence of quality gains remained uncertain. Summit already holds about 45% of inpatient admissions in its region, which suggests its acquisition would produce price increases at the high end of those estimates. Our group also asked whether acquisition would solve the problem Valley actually has. Its partners want to retire, and its younger physicians want stable income and less administrative work. Those needs can be met without a sale, through management services, shared staff and a path for younger physicians to buy in, so acquisition is not the only way to keep the practice viable or its referrals local.

Our group recommends that Summit not acquire Valley but instead invite it into a clinically integrated network. Summit would provide a shared electronic record connection, care management nurses for high-risk patients and a shared savings arrangement with its two largest commercial payers, while Valley's physicians remain independent and continue to bill at office rates. To address the retirement problem, Summit could offer recruitment support and loans to help younger physicians buy out the retiring partners. This approach keeps Valley's referrals aligned with Summit through coordination and shared incentives rather than ownership, and it avoids the price increases that would draw the attention of payers and antitrust authorities.

Micah answers the question of what God wants from his people with three requirements: act justly, cherish mercy and live humbly before him (English Standard Version Bible, 2001/2016, Micah 6:8). A strategy that wins referrals by raising what families pay for the same office visit may secure market share, but it fails the test of justice that a Christian leader is asked to apply.

Reply to Group 1

Group 1, your thread argued that a system should employ cardiologists to improve care coordination for heart failure patients, and you noted that employed physicians can follow common protocols more easily. We agree that coordination matters, and Walston (2018) lists it among the legitimate reasons for vertical integration. Two studies suggest testing whether coordination is what integration actually delivers. Whaley et al. (2021) used Medicare claims from 2013 to 2016 and found that after physician practices were integrated with hospitals and systems, imaging tests performed in hospital settings rose by 26.3 per 1,000 beneficiaries while those in nonhospital settings fell by 24.8, shifting care to higher-cost sites and adding about $73 million in Medicare spending for imaging and lab tests. McWilliams et al. (2013) found that larger hospital-based physician groups had higher per-beneficiary spending, by $849, and higher readmission rates than smaller groups, while larger independent groups performed better on quality measures. We would suggest your plan include safeguards, such as keeping routine tests in lower-cost sites. Proverbs says the Lord detests rigged scales and takes pleasure in accurate weights (English Standard Version Bible, 2001/2016, Proverbs 11:1), and coordination that quietly raises costs for the same test does not meet that standard.

Reply to Group 3

Group 3, your thread recommended that a system pursue growth through an accountable care organization built with independent practices rather than by acquiring them. Our group reached a similar conclusion, and the evidence supports your approach. McWilliams et al. (2013) found that larger independent physician groups had lower spending in areas where they shared financial risk and performed better than smaller groups on quality measures, and that a strong primary care orientation was linked to lower spending and fewer readmissions. Later evaluations of Medicare accountable care organizations reported that savings came mainly from organizations led by physician groups rather than those integrated with hospitals (McWilliams et al., 2016). Walston (2018) notes that alliances work only when partners' incentives are aligned, so we would encourage your group to specify how savings will be shared and how data will flow between practices. Paul compared believers to the parts of a single body, where the eye cannot tell the hand it is unnecessary (English Standard Version Bible, 2001/2016, 1 Corinthians 12:12-27), and a network of independent practices joined by shared purpose rather than ownership reflects that picture well, since each practice keeps its own identity while serving the same patients together and sharing responsibility for their outcomes.

References

Capps, C., Dranove, D., & Ody, C. (2018). The effect of hospital acquisitions of physician practices on prices and spending. Journal of Health Economics, 59, 139-152. https://doi.org/10.1016/j.jhealeco.2018.04.001

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

McWilliams, J. M., Chernew, M. E., Zaslavsky, A. M., Hamed, P., & Landon, B. E. (2013). Delivery system integration and health care spending and quality for Medicare beneficiaries. JAMA Internal Medicine, 173(15), 1447-1456. https://doi.org/10.1001/jamainternmed.2013.6886

McWilliams, J. M., Hatfield, L. A., Chernew, M. E., Landon, B. E., & Schwartz, A. L. (2016). Early performance of accountable care organizations in Medicare. New England Journal of Medicine, 374(24), 2357-2366. https://doi.org/10.1056/NEJMsa1600142

Post, B., Buchmueller, T., & Ryan, A. M. (2018). Vertical integration of hospitals and physicians: Economic theory and empirical evidence on spending and quality. Medical Care Research and Review, 75(4), 399-433. https://doi.org/10.1177/1077558717727834

Walston, S. L. (2018). Strategic healthcare management: Planning and execution (2nd ed.). Health Administration Press.

Whaley, C. M., Zhao, X., Richards, M., & Damberg, C. L. (2021). Higher Medicare spending on imaging and lab services after primary care physician group vertical integration. Health Affairs, 40(5), 702-709. https://doi.org/10.1377/hlthaff.2020.01006