Overcoming barriers to integrated health delivery.

As changes in healthcare delivery have swept the country, relationships among insurers, physicians, and hospitals have been altered dramatically. It is my belief that our healthcare systems are being affected by fundamental changes that will not be reversed and will eventually result in less costly, more consumerresponsive care delivery. To what extent provider-based healthcare systems will be altered, however, will be largely influenced by the local environment where healthcare is delivered. Those of us who manage healthcare institutions and services and who believe in the inevitability of these changes see little choice but to develop our organizations so they are part of larger, effective integrated delivery systems. A number of authors, however, are skeptical about the effectiveness of provider-based efforts to develop integrated systems. Jeff Goldsmith has remarked that he finds it "stunning how little hard evidence of economic advantage or market share gain has accrued from system development in healthcare" (Goldsmith 1994). A recent Health Care Management Review article stated that "There is little empirical evidence to support the promised benefits of any type of vertical integration." It was also noted that recent experience with a small number of vertically integrated healthcare systems is suggesting greater inefficiencies and organizational problems than benefits (Walston, Kimberly, and Burns 1996). Those who must reform their organizations to match and better the performance of non-integrated systems recognize that overcoming cultural and organizational barriers will require the support of governance, an external push from the environment, and good luck in the process. Greater Rochester Health System The impact that different regions and communities have in shaping the development of integrated delivery systems became very apparent to me as I recently moved from Chicago to Rochester, New York, to assume the position of president and CEO of the Greater Rochester Health System (GRHS), a new integrated healthcare delivery system. GRHS was established in December 1994 as a result of the union of two Rochester hospital systems, Rochester Health Care, Inc. and TGH Health System, Inc. The CEOs of these two systems, each on the eve of retirement, committed to bring their organizations together to create a new system that would provide seamless, integrated care for the greater Rochester area. Together they comprised Rochester General Hospital, Newark Wayne Community Hospital, The Genesee Hospital, and their affiliated organizations. With 1,415 acute and long-term care beds and more than 8,500 employees, GRHS is now the largest healthcare system in New York outside of New York City. It includes acute, longterm care; mental health services; independent living and housing services for seniors; and, in addition to evolving physician organizations, a private-label HMO. As a new organization, GRHS is going through predictable growing pains and transitions that might be experienced by any new and developing delivery system. The community of which it is a part and the state that establishes its regulation, however, also play a profound role in shaping how this system and others in the community may evolve. The New York Environment New York will be an interesting state to watch-and even more interesting to experience-as providers here make the rapid jump from regulated to competitive managed care markets. While New York ranks seventh in the country in HMO market penetration, with 28.3 percent of the population enrolled (Weil 1996), it has effectively discouraged the unified ownership and management of integrated delivery systems. In 1983, New York established the New York Perspective Hospital Reimbursement Methodology (NYPHRM) to contain cost, support financially stressed hospitals, and finance care for the uninsured (Fraser 1995). NYPHRM provided some of the nation's toughest controls over healthcare providers and insurers, and included community rating, facility rate regulation, and tight restrictions on the growth and expansion of facilities. …