Using a Transaction Cost Economics (TCE) approach, this paper explores which organizational forms Accountable Care Organizations (ACOs) may take. A critical question about form is the amount of vertical integration that an ACO may have, a topic central to TCE. We posit that contextual factors outside and inside an ACO will produce variable transaction costs (the non-production costs of care) such that the decision to integrate vertically will derive from a comparison of these external versus internal costs, assuming reasonably rational management abilities. External costs include those arising from environmental uncertainty and complexity, small numbers bargaining, asset specificity, frequency of exchanges, and information "impactedness." Internal costs include those arising from human resource activities including hiring and staffing, training, evaluating (i.e., disciplining, appraising, or promoting), and otherwise administering programs. At the extreme, these different costs may produce either total vertical integration or little to no vertical integration with most ACOs falling in between. This essay demonstrates how TCE can be applied to the ACO organization form issue, explains TCE, considers ACO activity from the TCE perspective, and reflects on research directions that may inform TCE and facilitate ACO development.
To address critics who assert health care executive compensation levels are not consistent with organizational performance, health care organization CEOs, board members, and consultants would benefit to carefully consider and effectively communicate the numerous factors influencing executive compensation beyond firm financial performance.
Despite their prevalence and power in markets throughout the United States, local multihospital systems (LMSs) -also referred to as hospital-based "clusters" -remain an understudied organizational form, with studies instead primarily focusing either upon individual hospitals or viewing hospital systems collectively without distinguishing the local "sub-systems" that comprise larger regional or national hospital chains. To better understand these organizational forms, we develop a taxonomy specifically devote to LMSs, applying taxonomic analysis methods to a sample of LMSs in six U.S. states while accounting for LMSs' geographic arrangements and nonhospital-based service locations. Our analysis identifies five distinct LMS categories, with forms clearly distinguished according to their varying degrees of differentiation and integration. The study's results accentuate the importance of accounting for hospital systems' activities and arrangements in local markets -including their non-hospital-based sites -and highlight differences in systems' achievement of integration and coordination across services and locations, providing considerations in light of U.S. health system reform as well as international patterns of regional system formation.
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