What are the barriers to horizontal and vertical integration?
Another important dimension of the healthcare sector is the extent to which the “system” is integrated, either horizontally (e.g., multiple hospitals or nursing homes owned by a single organization) or vertically (e.g., many different provider types in a single organization to provide a broader array of services to patients).
Horizontal Integration is structured so that an organization appears to have a central authority (“Mother Ship”) with a group of similar entities beneath it reporting to the central authority.
In other sectors of the economy, horizontal integration is very common — think of Starbucks or Apple where there are multiple sites all offering, more or less, the same products or services. In the healthcare sector, a horizontally integrated system might look like the image below, with multiple hospitals in the same community, region, or across the nation owned by a single corporation.
Vertical integration involves a structure where various elements of the healthcare “system” are included in a single organization. Such vertically integrated “systems” typically involve hospitals, physicians, long-term care services/facilities, behavioral health services, urgent care facilities, and even insurers. It is important to note that this type of integration can be categorized even further by type: ownership, contract, and in some case less formal agreement.
