Common Logo and Nothing More?

Edition: December 2002 - Vol 10 Number 12
Article#: 1396
Author: Repertoire

No one wants to hear the hackneyed phrase “the jury’s still out” about anything, from anyone, let alone the writer of an editorial page. But hey, sometimes it’s about all you can say. Especially when the topic is integrated delivery networks.

I’m thinking about this because of the things I saw and heard at the Fall Conference of the Healthcare Manufacturers Marketing Council in Chicago.

First, we heard from Lawton Burns, the Wharton School professor who wrote the book (reviewed in Repertoire earlier this year) The Health Care Value Chain. After studying IDNs from a number of perspectives for years, Burns has come to a stark conclusion, namely, that IDN administrators seem to lack the vision, the drive and the muscle to craft a cohesive unit out of multiple hospitals, nursing homes and (God forbid), doctors’ offices. He pointed out that hospitals rushed to merge with their neighbors back in 1994, when Hilary Clinton was crafting a new health plan for America, when managed care companies were beating up on hospitals and doctors, and when Columbia (now HCA) threatened to take over the health care provider world. It was classic herd mentality.

The CEOs of these IDNs told the public that they were grouping up to improve care, operate more efficiently, cut costs, and other good things, says Burns. What they didn’t say was that their decision to merge rarely was accompanied by any strategic planning. They rarely admitted that theirs was a play for market share. (Nothing to be ashamed of, at least to the rest of the world, but hospitals get skittish about making such claims.) They never said they wanted to beat HMOs and PPOs into submission by becoming bigger than they. And they never admitted that their medical staffs looked skeptically on the whole thing – even as the hospitals were buying them out. (“The height of hubris,” said Burns, speaking about hospitals’ delusion that they could manage physicians’ offices better than physicians themselves.)

Even so, had IDNs achieved all these things – improved outcomes, reduced costs, greater customer service, etc. – the public and the supply chain probably would have overlooked all these darker (or at least less altruistic) motives for joining forces with other providers. But the IDNs didn’t deliver, says Burns. They didn’t reduce costs, they didn’t improve care, they didn’t rationalize their systems, they didn’t improve customer service, and they didn’t stem the inflationary tide of health care insurance premiums. The fact is, except in rare instances, they never really merged with each other at all, he says. In most cases, the medical staffs still operate independently of each other, purchasing is fragmented, and similar services are delivered in multiple facilities, etc. As one attendee at the meeting said, most IDNs are little more than a group of hospitals under a common logo.

But right after Burns spoke, two IDN materials executives presented their self-contracting, self-distribution models. No, Repertoire readers might not like the “self-distribution” part. (And I wonder how many IDNs will follow suit.) But the point is, these two gentlemen – Nick Toscano of Virtua Health in south New Jersey, and Vance Moore of the Sisters of Mercy in St. Louis – come from IDNs that seem to be beyond the common logo stage. They are making investments and taking risks to build something truly new.

The question is, how many others like them are there? How many can overcome the difficulties of merging multiple facilities and build new, effective health care provider systems? How many will fall apart before those difficulties can be overcome? And how many will fall apart before those in charge even realize the true extent of the difficulties they face?

The answer is, of course, “The jury’s out.” In the meantime, approach IDNs with prudence and clear, open eyes. Look carefully. Does the one you’re calling on have more than a common logo?