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The American Journal of Managed Care May 2013
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Effects of Integrated Delivery System on Cost and Quality
Wenke Hwang, PhD; Jongwha Chang, PhD; Michelle LaClair, MPH; and Harold Paz, MD, MS
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Effects of Integrated Delivery System on Cost and Quality

Wenke Hwang, PhD; Jongwha Chang, PhD; Michelle LaClair, MPH; and Harold Paz, MD, MS
Integrated health systems are often portrayed as the most effective in providing high-quality care at lower costs. This systematic review assesses the empirical evidence.
Cost. Few studies examined the impact of IDSs on cost of care. Only 5 peer-reviewed papers in our systematic review looked at healthcare cost.18,23,24,26,29 Of those, most studies provided evidence about the differences in utilization of services for patients treated in IDSs versus non-IDSs. In other words, the level of service utilization per patient was used as a proxy measure for cost of care. Using this measure, 4 out of 5 papers reported that IDSs were associated with lower cost of care. Two studies found that clinical service integration in various forms of ACOs and large multispecialty group practices would lower cost of care.18,29 One study examined the medication treatment management program within an IDS and concluded that the program generated cost savings related to medication use.26 One study discussed the cost related to the level of service integration within the hospital for patients with heart failure, but found no significant relationship between integration of services and economic outcomes.23

Non–Peer Reviewed Publications

The studies selected for this review consist of 2 monographs35,36 and 2 white papers37,38 on the topic of IDSs.

Quality. Of the 4 selected non–peer reviewed publications, 3 reported that improvements in quality of care were associated with health systems’ clinical service integration. All 3 reports showed improvement in HEDIS measures.35-37 Among the 17 different health systems these reports examined, IDSs were associated with a lower hospital admission rate per patient, a shorter length of stay per hospital admission, and an overall lower rate of adverse health outcomes. With IDSs, there also were increases in the use of evidencebased practices by physicians in various fields.35 Many IDSs also saw improvements in preventive care (eg, increased vaccination rates).35-37 Although these studies appear to indicate a positive correlation between integration and quality of care, 1 report found that expected quality improvements were not present. They also found that patients participating in multiyear wellness and prevention programs in 1 IDS showed little to no health improvement38 (Table 235-38).

Cost. Of the 4 non–peer reviewed publications selected for this systematic review, 3 examined cost of care. All 3 publications reported that cost savings were seen in health systems that had various features of clinical integration. Of these 3 reports, 2 found that there were substantial improvements in quality-of-care measures that the researchers assumed led to indirect cost savings for the system. These reports also noted that substantial cost savings were associated with electronic prescribing implementation due to a tandem generic medication prescription initiative within the IDS involved.35,37 While these reports indicate positive results, 1 report using data from several IDSs across the country found that, among the systems observed, there was very little cost difference, and that when cost differences were observed they were much smaller than what was expected.38


A variety of emerging concepts describe IDSs. Most of the studies are theory based, yet the tenets of the theories have not been tested empirically to evaluate the relationship between the level of integration and either cost or quality outcomes. Earlier work by Shortell and colleagues17 suggests that it is not size or structure per se, but rather an organizational commitment to, and culture of, continuous quality improvement that is most closely linked to better performance as measured by clinical quality, patient satisfaction, organizational learning, and financial performance. However, relatively few medical groups were high performers in all performance categories. In many cases, a medical group’s performance varied considerably within the domain of clinical quality; for example, a medical group that performed well in chronic disease management might be average or below in health promotion. Furthermore, the same study by Shortell and colleagues showed no correlation between high performance on quality measures and financial performance, calling into question the assumption that IDSs are inherently better at both improving quality and controlling costs. The researchers did find some positive correlation between high performance on quality measures and certain indicators of integration (eg, larger practice size, affiliation of the medical group with a hospital, health system, or health plan), yet affiliated practices were actually less likely to be high performers on financial measures.

The result of our systematic review provides partial evidence outcomes. The evidence on cost of care, however, is rather weak. No study in our review was able to directly measure the cost savings as a result of integration of a health system. Most studies reported a decrease in healthcare utilization as a result of health system integration but did not assess whether the decrease of service utilization was appropriate. While many of the IDSs involved in these studies had improvements in quality of care with lower service utilization, it is important to note these studies’ limitations. First, many of these reports did not include any indication that statistical tests were performed on the data. While the general data trends may have been positive in the areas of cost and quality, significance cannot be assumed. Also, most of the IDSs included in these studies were implementing multiple programs within and outside of their clinical integration initiatives. It is important to note that healthcare systems may operate under different mixes of reimbursement models (eg, managed care contracts). It was not possible for us to take this factor into consideration, as most of the studies included did not report on reimbursement models.

It is also difficult to distinguish the effect of integration per se from the effects of characteristics (eg, larger patient volume, greater use of electronic medical records, systematic quality improvement initiatives) that tend to be associated more frequently with integrated systems. Therefore, larger sample sizes that include various types of IDSs and more consistent outcome measures are needed to gauge the effects of IDSs on the cost and quality of care.


ACOs and their features involving integrated delivery of healthcare are currently at the forefront of healthcare policy. The hope for the ACO is that it will reduce healthcare costs and improve the quality of care. However, there are no data to support these assumptions, as these systems have only recently been created. Integrated healthcare delivery systems share with ACOs many of the same organizational features, foremost among them being high levels of organizational and clinical service integration. For this reason, the performance of existing IDSs with respect to quality and cost of care are being assessed to predict how well ACOs will perform in the future US healthcare system.9

The vast majority of studies we reviewed showed that IDSs have positive effects on quality of care. A few studies we reviewed also linked IDSs to lower health service utilization. However, each study had a different way of describing and defining IDSs. In order to compare IDSs with respect to their effectiveness in controlling costs and improving quality of care, consistent definitions should be used and components of integration need to be well defined. Due to limited information provided in the literature, we were unable to identify specific features in each health system. Nor were we able to meaningfully group the health systems based on their commonalities into various types of IDSs. As a result, it was difficult to draw definitive conclusions. Moreover, to accurately capture the performance of a health system, established methods that consistently measure cost and quality of care across health systems are needed.

Our study has other limitations. The study lacks generalizability due to the heterogeneous nature of the IDS in the studies we reviewed, the unavailability of effect size calculations, and the absence of systematic working definitions for outcomes. There also may be publication bias since there is a higher probability of peer-reviewed journals publishing studies with favorable results rather than studies with inconclusive or unexpected results.

As integrated systems become more common, it also is becoming more apparent that despite certain commonalities, these systems vary tremendously in how they operate. The emergence of a growing number of IDSs should allow for more data-driven studies comparing organizational performance on quality, safety, access, and cost metrics, thereby adding more insight into exactly what characteristics of IDSs lead to improvements in each of these areas. The question, perhaps, is not so much whether IDSs are better than other models of delivery, but rather, how to identify specific system features that most effectively improve quality of care while controlling costs.

Author Affiliations: From Department of Public Health Sciences (WH, JC, ML), Department of Medicine and Public Health Sciences (HP), Division of Health Services Research, Penn State University College of Medicine, Hershey, PA.

Funding Source: None.

Author Disclosures: Dr Paz reports board membership with Penn State Hershey Medical Center. The other authors (WH, JC, ML) report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (WH, HP); acquisition of data (WH, JC, ML); analysis and interpretation of data (WH, JC, ML, HP); drafting of the manuscript (JC, WH, ML); critical revision of the manuscript for important intellectual content (WH, ML, HP); obtaining funding (WH); administrative, technical, or logistic support (WH, ML); and supervision (WH).

Address correspondence to: Wenke Hwang, PhD, Department of Public Health Sciences, Division of Health Services Research, Penn State University College of Medicine, 600 Centerview Dr, Ste 2200, Hershey, PA 17033. Email:
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