The Agenda

Integrated Health Systems and Socialized Health Systems Aren’t the Same Thing

Ezra Klein is a fan of the VHA. After citing evidence of the the system’s success, which I encourage you to peruse, he writes:

The thing about the Veteran’s Administration’s health-care system? It’s socialized. Not single payer. Not heavily centralized. Socialized. As in, it employs the doctors and nurses. Owns the hospitals. And though I think there’s some good reason to believe its spending growth is somewhat understated — it benefits heavily from medical trainees, for instance — accounting for that difference still means a remarkable recent performance.

I’d describe a health system that employs doctors and nurses, owns hospitals, etc., as “integrated,” not necessarily as “socialized.” An integrated health provider can be publicly-owned or privately-owned. It can operate on a for-profit basis or on a not-for-profit basis. The VHA is publicly-owned, and so “socialized” is a fair characterization. Yet the mere fact that it employs doctors and nurses and owns hospitals is not what makes it a “socialized” system.

I see no intrinsic reason to believe that privately-owned integrated health systems can’t outperform publicly-owned integrated health systems. Indeed, if Medicare FFS didn’t encourage the fragmentation of service delivery, it seems reasonable to believe that we would have long since moved in that direction. Given the political constraints facing publicly-owned integrated providers, privately-owned integrated providers might have an advantage in terms of their ability to deploy talent and resources across the institution. To be sure, the fact that patients can defect from one integrated provider to another in a competitive landscape is in some sense a disadvantage relative to the VHA’s approach: because the VHA is responsible for the long-term care of its beneficiaries, it has a strong incentive to make decisions for patients that make sense over the life cycle rather than a given billing cycle. That said, competition can spur improvements in cost-effectiveness and quality. 

The Innosight Institute has profiled the work of a number of private integrated providers, including Pennsylvania-based Lancaster General Health and HealthPartners. The report on Lancaster General Health paper also makes reference to Pennsylvania’s Geisinger Health System, a physician-led, staff model, integrated health care system that has attracted considerable attention. 

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