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This paper reviews the rationales and evidence for horizontal and vertical integration involving hospitals. We find a disjunction between the integration rationales espoused by providers and those cited in the academic literature. We also generally find that integration fails to improve hospitals' economic performance. We offer seven lessons from hospitals' efforts to integrate and then suggest four alternative models for achieving integrated delivery of health care services.

Context: Hospital-physician relationships (HPRs) are an important area of academic research, given their impact on hospitals' financial success. HPRs also are at the center of several federal policy proposals such as gain sharing, bundled payments, and pay-for-performance (P4P). Methods:This article analyzes the HPRs that focus on the economic integration of hospitals and physicians and the goals that HPRs are designed to achieve. It then reviews the literature on the impact of HPRs on cost, quality, and clinical integration. Findings:The goals of the two parties in HPRs overlap only partly, and their primary aim is not reducing cost or improving quality. The evidence base for the impact of many models of economic integration is either weak or nonexistent, with only a few models of economic integration having robust effects. The relationship between economic and clinical integration also is weak and inconsistent. There are several possible reasons for this weak linkage and many barriers to further integration between hospitals and physicians.Conclusions: Successful HPRs may require better financial conditions for physicians, internal changes to clinical operations, application of behavioral skills to the management of HPRs, changes in how providers are paid, and systemic changes encompassing several types of integration simultaneously.

The 1980s and 1990s witnessed a substantial wave of organizational restructuring among hospitals and physicians, as health providers rethought their organizational roles given perceived market imperatives. Mergers, acquisitions, internal restructuring, and new interorganizational relationships occurred at a record pace. Matching this was a large wave of study and discourse among health services researchers, industry experts, and consultants to understand the causes and consequences of organizational change. In many cases, this literature provides mixed signals about what was accomplished through these organizational efforts. The purpose of this review is to synthesize this diverse literature. This review examines studies of horizontal consolidation and integration of hospitals, horizontal consolidation and integration of physician organizations, and integration and relationship development between physicians and hospitals. In all, around 100 studies were examined to assess what was learned through two decades of research on organizational change in health care.

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This is the first comprehensive review of the scale and scope economies of physician practice in nearly two decades. The research results do not appear to have changed much; nor has much changed in physician practice organization.

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