Integrated Service Network (ISN)

Virtual Integration

Virtual integration is the opposite of common ownership of assets and practices. Three elements are necessary for a functional virtually integrated system:

[Page 299]
• Contracts and agreements covering patient referrals and management
• An information system that transfers information and tracks events and outcomes
• Financial incentives that are aligned to support and integrate the activities of the various actors, including patients

One advantage of virtual integration is that each provider maintains its ownership interest and has an incentive to make its portion of the enterprise productive and efficient, while striving to meet the overall goals of the network’s governing body.

If the network is going to undertake risk contracting, such as capitation, it must also have mechanisms that capture actual costs, monitor utilization, disseminate best practices, and motivate system and unit improvements, as well as coordination of patient care. The network must be large enough to have a sufficient patient pool to make risk-taking effective and a data-tracking system to support its underwriting and rate-setting functions.

Governace

Reaching economic decisions that stand up in the marketplace over time is difficult for networked organizations. The interests of primary care physicians, specialists, and hospitals can be at odds with each other. Where there is no executive in charge with the power to hire and fire and no external board of directors to evaluate CEO performance, conflicts are difficult to resolve. Strong physician leadership and good information systems are keys to effective management. Partnerships are not easy to manage, but a network is not even a partnership. There may not be a common bottom line. There has to be a give and take among the bottom lines of all the network members mediated by payment systems and by committee structures that consider key issues and make recommendations that network members must be willing to live with. Key committees must deal with membership and credentialing, revenue allocation among providers, contract negotiation, quality assurance, utilization review, and medical management.

...