Integrated Delivery Systems: The Cure for Fragmentation

Published Online: December 15, 2009
Alain C. Enthoven, PhD

Our healthcare system is fragmented, with a misalignment of incentives, or lack of coordination, that spawns inefficient allocation of resources. Fragmentation adversely impacts quality, cost, and outcomes. Eliminating waste from unnecessary, unsafe care is crucial for improving quality and reducing costs-and making the system financially sustainable. Many believe this can be achieved through greater integration of healthcare delivery, more specifically via integrated delivery systems (IDSs). An IDS is an organized, coordinated, and collaborative network that links various healthcare providers to provide a coordinated, vertical continuum of services to a particular patient population or community. It is also accountable, both clinically and fiscally, for the clinical outcomes and health status of the population or community served, and has systems in place to manage and improve them. The marketplace already contains numerous styles and degrees of integration, ranging from Kaiser Permanente-style full integration, to more loosely organized individual practice associations, to public-private partnerships. Evidence suggests that IDSs can improve healthcare quality, improve outcomes, and reduce costs-especially for patients with complex needs-if properly implemented and coordinated. No single approach or public policy will fix the fragmented healthcare system, but IDSs represent an important step in the right direction.

(Am J Manag Care. 2009;15:S284-S290)



It is no secret: our healthcare system is fragmented, suffering from what George Halvorson calls "clinical linkage deficiencies."1 These systemic deficiencies, evidenced by conflicting incentives and lack of coordination, cost lives and fuel the unsustainable spiral of US healthcare expenditures.2,3

For example, the Dartmouth Institute for Health Policy & Clinical Practice estimated that 30% to 40% of all hospitalizations are avoidable and that among regions, Medicare costs can vary 2- or 3-fold higher to treat similarly ill patients, without better outcomes.4 As late as 2005,5 preventable medical errors caused more deaths than breast cancer, automobile accidents, or drowning.6 In January 2009, an article in The New England Journal of Medicine stated that using a simple surgical checklist could reduce the death rate from surgery by half, decrease complications by more than a third, and save US hospitals about $15 billion per year.7

Eliminating waste from unnecessary, unsafe care is crucial for improving quality and reducing costs-and making the system financially sustainable. Many believe this can be achieved through greater integration of healthcare delivery,3,8,9 more specifically via integrated delivery systems (IDSs). Without greater integration, some predict a systemic "meltdown."3 However, relatively few people, inside or outside healthcare, know about the benefits-or even the existence-of IDSs.10

The IDS concept is not new. It first appeared in the 1930s,8,11 and gained traction in the 1980s. In the 1990s, IDSs were confused with "managed care," created by insurance companies, usually with little or no integration of providers. Given the accelerating costs of US healthcare, the recent economic downturn, and the outcry for reform, interest in IDSs has been rekindled. Even President Obama talks about Mayo, Intermountain, Geisinger, and Kaiser Permanente-all prominent IDSs.

IDS Defined

Integrated healthcare can be better understood by considering the opposite.

What Does "Fragmented" Mean and How Did We Get Here?

"Fragmentation" in healthcare delivery means the systemic misalignment of incentives, or lack of coordination, that spawns inefficient allocation of resources or harm to patients. Fragmentation adversely impacts quality, cost, and outcomes.12

This systemic fragmentation is difficult to dislodge. Fragmentation is steeped in the history and culture of medicine and is embedded population-wide in the current system-operationally, financially, and in the clinic.

Charles D. Weller called the current fragmented system "guild-free choice," suggesting that the traditional American model of medical care can be likened to guilds in medieval Europe.13-15 Organized medicine uses the term "free choice" fee-for-service (FFS); specifically, individuals should have freedom to choose physicians and hospitals anytime a la carte.16 They should not be allowed to choose an insurance plan that limits their choice of provider to those in an organized delivery system in exchange for what they judge to be superior value.

After World War II, health insurance became the province of employers. To give employees insurance without provoking the medical profession, employers and insurers followed the "free choice" FFS construct. For administrative simplicity, most employers adopted the single-carrier, single-plan design-a "one size fits all" approach.

The professional culture of medicine has contributed to fragmentation by revering physician autonomy and infallibility.14,15,17 Education and training emphasize individual rather than team performance; physicians tend to practice as individuals.18 Predictably, solo or small single-specialty group practices have dominated the landscape, with unfortunate fallout: wide variation in practices and costs and relatively low accountability-a dearth of guidelines, utilization and quality management, collaboration, and peer review.14,15

Traditional guild-like control, coupled with insulation from accountability, has given physicians a de facto monopoly over major decisions, including admitting patients to the hospital and choosing interventions. As a result, physicians still control (directly or indirectly) most of personal health spending,19 notwithstanding extensive insurer-imposed limitations.

The accelerating advances and complexity of modern healthcare have driven greater specialization and a "silo approach" to healthcare consistent with the described isolationist history and professional culture.6 Yet, in recent years, increasingly prevalent chronic, often comorbid conditions (eg, diabetes, heart failure, depression) require that patients receive care from multiple providers in multiple settings. Although intensified specialization sought to generate greater interdependence among clinicians and the need for cross-silo coordination, greater specialization has exacerbated fragmentation by increasing the number of narrowly trained specialists.

Other observers assert that organized medicine has historically used its considerable clout to preserve the status quo, resisting efforts to systemically improve the quality and safety of medical care20 and to form multispecialty group practices (MSGPs) or prepaid group practices (PGPs).21

Throughout this evolution, FFS has been the primary payment model.10 However, the FFS model contributes to fragmentation. Under FFS, physicians earn more by providing more services, thereby interposing an inherent disconnect between physicians' economic self-interest and the interests of their patients. In short, traditional FFS rewards production volume rather than value or outcomes.9

For patients, who simply want their doctors to help them stay healthy or get better, the fragmented system resembles, as George Bernard Shaw wrote in The Doctor's Dilemma, arrayed "conspiracies against the laity."22

What Does "Integrated" Mean?

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