Chapter 9. Competition, Cooperation & Integration

1. Chapter 9. Competition, Cooperation & Integration Long-Term Care: Managing Across the Continuum (Second Edition)

2. Learning Objectives • Understand the nature of the competitive forces acting on long-term care organizations • Define the various forms of cooperation and integration • Discuss the benefits of the various forms of integration • Identify the components of integrated systems and networks • Discuss management, financing, and quality issues related to integration

3. Background Reasons for more competition, cooperation, integration: • Environment • Increased demand • More providers • More demanding consumers • Financing changes • Pressures to reduce costs • Managed care

4. Competition “Rivalry between two or more businesses striving for the same customer or market”

5. Conditions Required for Competition • Lack of influence by individual buyers and sellers • Lack of collusion to fix prices or quantities • Free and easy entry into the market • Few government restraints • Good information about price and quality

6. Sources of Competition • Other providers of the same type • Other types of long-term care providers • Other health care providers • Managed care organizations

7. Effects of Increased Competition • New opportunities for some providers, threats to others who do not compete • More large, multi-unit chains, fewer small individual facilities • More cooperation & integration

8. Cooperation Agreements are not highly formalized • Transfer agreements • Shared purchasing • Sharing of scarce professionals

9. Integration • More formal than cooperation • Seeking organizational efficiency and effectiveness • Higher degree of central control • More exclusive contractual agreements

10. Horizontal Integration Multiple providers of the same level of care (e.g., nursing facility, assisted living) Central Organization Nursing Facility A Nursing Facility B Nursing Facility C Nursing Facility D Horizontal

11. Vertical Integration Multiple providers, different levels of care Central Organization Hospitals Subacute Care Vertical Nursing Facilities Assisted Living Home Health Care

12. Reasons for Joining an Integrated System or Network • Economies of scale • Gaining market share • Increased bargaining power • Protection from competitors

13. Benefits to Consumers • Larger range of services • Better access, availability of services • Coordinated information, scheduling • Centralized financial information, meaning less hassle

14. Continuum of Care Integrating Mechanisms • Planning and management • Coordination of care • Information systems • Financing mechanisms

15. Governance Issues • Balancing interests of overall system or network and those of the member organizations • Mixture of nonprofit and for-profit organizations • Anti-trust potential

16. Summary Increased competition within long-term care has created pressures to cooperate and integrate, with accompanying opportunities and challenges, but it is here to stay.