The determinants of hospital and HMO vertically integrated delivery systems in a competitive health care sector

Abstract

As a response to increased competition in the U.S. health care system, there have been a number of structural changes such as substantial increases in the number of hospital closings, horizontal mergers, and vertical combinations. This paper uses logistic regression and ordinary least squares models to attempt to understand why short-term, non-federal hospitals have created vertically integrated systems with HMOs in urban and rural markets during the 1993-1997 period. During this period, 1,917 integrated systems were formed while 1,466 dissolved. The empirical results indicate that the relative buying power of hospitals is a significant determinant of why hospitals would create vertically integrated systems with HMOs. Other variables also have significant effects upon the creation of vertical affiliations both at the individual hospital level and at the market level.