Build, Buy, or Align – Creating Integrated Health Systems for Value-Based Care

Healthcare organizations need to pursue clinical integration if they expect to flourish in an environment defined by value-based reimbursement. Organizations that lack a comprehensive portfolio of clinical service offerings risk losing ground to health systems that are better able to control costs and keep patients from seeking care outside a tightly integrated network.

In a previous blog post, we examined the first steps on the path to clinical integration – in particular, identifying gaps in service. Once providers identify those gaps, a bigger decision looms: how to fill them. This post considers the options.

Build – The “build” option involves developing a service from the ground up. It requires recruiting providers, building infrastructure (e.g., clinic space), and hiring seasoned leaders to manage the program and position it for success. Such organic growth is typically the slowest approach to program development, although it allows for the service to be customized to the health system’s needs.

Buy – Acquiring existing infrastructure, by contrast, is usually the quickest way to forge an integrated program. Without the need to assemble new resources, the “buy” option is an efficient strategy based on the acquisition of existing provider organizations and their associated technology, clinic space, and administrative leadership. The acquisition model is also advantaged by the presence of established referral patterns, which minimize the need for investment to develop the program.

Align – Of course, not every organization is willing or able to be acquired. Alignment may be a viable alternative in such cases; and like acquisition, this approach capitalizes on existing infrastructure. Traditional alignment models include professional services agreements, comanagement agreements, and joint ventures. More recently, organizations have achieved alignment through managed care strategies such as patient-centered medical homes, accountable care organizations, and clinically integrated networks. While alignment and acquisition both offer benefits in terms of timing, the alignment approach may lack the durability or level of integration (clinical, financial, or strategic) found in an acquisition model.

Which option is best?

Each option has the potential to help an organization develop a comprehensive, integrated portfolio of clinical services. The ideal approach will depend on the organization, the gaps it needs to fill, the demand for a particular service, and a host of other factors.

However, considering the pace of change in today’s healthcare market, the most critical factor may be timing.

As markets shift to value-based payment models, the imperative for clinical integration will continue to grow – but the time available to achieve integration will shrink. Organizations will likely find that quickly internalizing certain clinical services is a strategic and/or financial necessity. In such cases, acquisition is likely to be the preferred approach.

Furthermore, chances are that organizations in the same market are making similar decisions about whether to build, buy, or align. The ability to quickly acquire clinical competencies will thus be a competitive advantage, as slow-moving organizations may miss out on key strategic opportunities. Regardless of which path to clinical integration an organization selects, the time to start planning is now.

For a deeper look at the decisions associated with building a comprehensive clinical portfolio, download your copy of Build, Buy, or Align: Creating Clinically Integrated Health Systems.

This entry was posted in Clinical Integration, Integration, Mergers & Acquisitions and tagged , , , , , , by Matt Sturm. Bookmark the permalink.

About Matt Sturm

A healthcare consultant for more than 10 years, Matt’s career has focused on improving access to high-quality clinical care, especially for life-threatening conditions. To this end, Matt has focused on working with health systems to create improved and/or enhanced care delivery models. His passion for healthcare and his clients’ patients is evidenced by his deep expertise in strategic and business planning, service line development, and mergers and acquisitions. Matt is recognized as a firm leader in business transactions and is co-leader of ECG’s Transaction Advisory Services practice. He has facilitated dozens of complex business transactions among hospitals, health systems, and medical groups. Matt’s clients value his proven track record of developing innovative solutions to complex problems, ultimately finding a way to get the deal done while providing pragmatic counsel to ensure that the arrangement will be durable. Matt is also a firm leader in oncology services and serves as the co-leader of ECG’s Oncology practice. Matt has assisted dozens of oncology clients with a variety of strategic and operational issues related to creating better, more comprehensive, and sustainable cancer enterprises. This work has included developing strategic plans, aiding programs in launching new clinical modalities, and assisting programs with growth and expansion opportunities through acquisition and partnership. Matt views every oncology project as an opportunity to aid in the war on cancer; his technical expertise, relentless drive, and collaborative approach to working with his clients yields enduring benefits for his clients.

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