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A study in The American Journal of Managed Care examined which types of hospital integration are associated with lower costs. Na-Eun Cho of Hongik University studied 427 California hospitals from 2014 to 2016 using data from CMS Hospital Compare, Let's Get Healthy California, and American Hospital Association surveys.
The study separated hospital integration into three types. Structural integration refers to ownership or organizational ties, such as hospitals employing doctors or joining a larger system. Financial integration refers to payment arrangements in which hospitals share financial risk. Information-sharing integration refers to hospitals' use of electronic patient information from external sources.
The main finding was that financial integration was most strongly associated with lower hospital spending. The study estimated that a one-percentage-point increase in financial integration was associated with a 0.3% decrease in hospital costs. That amounts to about $120 for a $40,000 hospital episode.
The study did not find the same clear link for structural integration or information sharing when each was examined on its own. It also found that capitation was not linked to lower costs. Shared-risk payment arrangements were the financial approach most clearly associated with lower spending.
The author concluded that hospitals and policymakers may achieve better cost outcomes by focusing on well-designed financial incentives, especially shared-risk arrangements, rather than relying primarily on mergers, ownership changes, or capitation.
