Strategic integration of hospitals and physicians

| February 4, 2014

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Please read: Cuellara, A. E. & Gertlerb, P.J. (2006). Strategic integration of hospitals and physicians. Journal of Health Economics. Volume 25, Issue 1, January 2006, Pages 1-28. Click here Abstract: A striking development in the healthcare market place has been the formation of strategic relationships between hospitals and physicians. Hospital/physician integration appears to be a response to rapidly expanding managed care health insurance. We examine whether integration lead to efficiency gains from transaction cost economies thereby allowing providers to offer managed care insurance plans lower prices or whether integration is really a strategy to improve bargaining power and thereby increase prices. We find that integration has little effect on efficiency, but is associated with an increase in prices, especially when the integrated organization is exclusive and occurs in less competitive markets. NOTE: Focus on the concepts and not on the data tables. 1. Please choose 2 types of physician-hospital arrangements. 2. Compare the major points of these 2 types as they pertain to: (a) Physician-hospital relationships. (b) Which in your eyes is more effective? Explain your reasons for your decision. Seperate each question as question 1, 2 (a) (b).
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