Partial integration has its benefits

Healthcare systems looking to innovate might do well to avoid completely open or closed models, according to research by the Innosight Institute, a not-for-profit think tank that recently published a white paper titled “Disruptive Innovation in Integrated Care Delivery Systems.”

Innosight Institute Executive Director Jason Hwang defines “integrated” as an organization that retains responsibility for financing and delivery of healthcare. “The prototypical example is Kaiser Permanente, which basically owns the whole system,” Hwang says. “We assumed a lot of people wanted to be like Kaiser, but we were wrong.”

Through interviews for a series of case studies the white paper is based on, Hwang said they found many service providers using a hybrid model, where part of the system was closed, but it still contracted with non-system providers, hospitals and plans.

“Most people we found did not want to be closed like Kaiser,” Hwang said. “They were concerned about becoming self dealing. If they only dealt internally, they might not see how the market was changing. Secondly, a lot of people saw a hybrid system as source of innovation and a way to promote innovation.”

Hwang said the systems he profiled often used the closed part of their systems as innovation labs where they identified and tested ideas they could then roll out to the open part of their system.

But hybrid systems have their drawbacks. Closed networks have proven to be the best way to manage costs and maintain quality, Hwang says. The systems with hybrid models realized their closed segment was the most cost-effective, but they still wanted to be able to offer choice.

“There was a trade off here, clearly, to appease marketplace,” he says.

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