The decision to integrate vertically in health care organizations

Abstract

A scheme to help health care managers make decisions regarding vertical integration (and deintegration) strategies and to alert health care managers to a more analytic view of vertical integration that may help avoid costly mistakes is presented. Central to the decision-making scheme is the comparison between the costs of purchasing goods and services from (and selling them to) other organizations and the costs of acquiring (and supplying) the same goods and services within one's own organization. Whether outside or inside an organizational boundary, these costs (called transaction costs) may be important in determining whether vertical integration is an appropriate organizational strategy (Williamson 1975).