It enables analysts to assess relative changes in different line items over time, and project them. The analysis of critical measures of business performance, such as profit margins, i nventory turnover and return on equity, can detect emerging problems and strengths. For example, earnings per share EPS may have been rising because the cost of goods sold have been falling, or because sales have been growing strongly. And coverage ratios, like the cash flow-to-debt ratio and the interest coverage ratio can reveal whether a company can service its debt and has enough liquidity.
Twitter By Lawton R. Using data from a variety of sources, we find there are two separate phenomena at work in physician organization. At one end of the spectrum bottom tail of the size distribution of physician groupsthe majority of physicians continue to practice in small groups, although there has been some movement from really small practices one to three or four physicians to slightly larger groups five to nine physicians.
Still, nearly two-thirds of office-based physicians continue to practice in solo settings, two-person partnerships, and small usually single specialty groups with five or fewer physicians.
At the other end of the spectrum upper tail of the distributionhowever, is a smaller number of very large and rapidly growing multispecialty physician groups, which are often owned by hospitals, health plans, private equity firms, or other non-physician sponsors.
Key integration forms There are two key forms of integration in physician markets. Horizontal integration occurs when individual physicians join group practices or existing groups merge with each other.
There are numerous theoretical reasons to expect that this type of integration might lead to improved quality and cost savings, including enhanced operating efficiency and economies of scale. When groups consist of physicians across multiple specialties, there also may be gains from economies of scope, including improved coordination and quality of patient care, in-house or within network referrals, and capture of high-revenue services such as outpatient surgeries and imaging services.
We find some evidence that group practices are more productive than solo practices in terms of number of patient visits or gross revenues per physician, though scale economies appear to be reached quickly — at around 10 or so physicians in a group.
Beyond this, monitoring, coordination, and creating a cohesive culture become challenging. Scope economies do not appear to exist or are, at best, weak. Again, there are many theoretical rationales underpinning these relationships, including lowered transaction costs and improved efforts to monitor, manage, and coordinate patient care, increased network size and geographic coverage to handle risk contracting, and market power over buyers and suppliers.
In addition, these relationships may help physicians stabilize their incomes, manage malpractice, and improve the predictability of their caseload. Because of the supposed advantages, and based on numerous media reports of physician hiring, many analysts assert that physician employment levels have reached as high as percent of all doctors.
Questions about effectiveness The data show that hospital-physician integration is on the rise, but not as fast and nowhere near the levels that analysts propose.
There is similarly no evidence of improved quality following integration. Finally, there is evidence that economic integration between physicians and hospitals does not automatically lead to functioning clinical integration and that, even after integration, a lack of alignment between physicians and hospitals threatens the success of these models.
Another form of vertical integration is between providers and health insurance plans. There are several well-known examples of these systems, including Kaiser Health Plan and other major integrated systems e.
The success of these integrated systems can be attributed to a number of features, in particular a notably physician-driven system, unified clinical and administrative cultures, a long history with sufficient time to develop this culture, and strong economic interdependence among their three arms the physicians, the hospital, and the health plan.
Areas of renewed focus With the implementation of the Affordable Care Act, there is a renewed focus on horizontal and vertical integration of physicians. Insurers have purchased medical groups in efforts to cut costs by managing patient care and physician networks more tightly.
Though the mass of physicians remain organized into small, independent, and fragmented group practices, there is clearly flux in the physician market with growth in the number of large groups and increasing physician employment by hospitals. There is no evidence to suggest how each tail will fare competitively going forward, but past experience suggests that achieving widespread cost savings and quality improvements through restructuring the delivery system alone will be challenging.
To be most effective going forward, policymakers ought to revisit the evidence on integrated systems and consider how they may be implemented and targeted e. Aditi Sen is a doctoral student in health care management at the University of Pennsylvania.With the implementation of the Affordable Care Act, there is a renewed focus on horizontal and vertical integration of physicians.
Insurers have purchased medical groups in efforts to cut costs by managing patient care and physician networks more tightly. Financial Statement Analysis is a method of reviewing and analyzing a company’s accounting reports (financial statements) in order to gauge its past, present or projected future performance.
This process of reviewing the financial statements allows for better economic decision making. Globally. What We’ve Learned from Horizontal and Vertical Integration of Physicians. Apr 25, SHARE. Horizontal integration occurs when individual physicians join group there is a renewed focus on horizontal and vertical integration of physicians.
Insurers have purchased medical groups in efforts to cut costs by managing patient care. In fundamental analysis, the comparison of a financial ratio or some other benchmark to the same ratio or benchmark for a different period of time.
For example, horizontal analysis may investigate whether a company's earnings have gone up or down over a given quarter or torosgazete.comntal analysis may be used in making investment decisions to determine a company's financial health. Horizontal analysis of financial statements involves comparison of a financial ratio, a benchmark, or a line item over a number of accounting periods.
This method of analysis is also known as trend analysis. Horizontal analysis allows the assessment of relative changes in different items over time.
How Horizontal Analysis Works.
A good way to do some ratio and trend analysis work is to prepare both horizontal and vertical analyses of the income statement. Both analyses involve comparing income statement accounts to each other in dollars and in percentages. Understanding horizontal and vertical analysis is essential for. Financial Statement Analysis is a method of reviewing and analyzing a company’s accounting reports (financial statements) in order to gauge its past, present or projected future performance. This process of reviewing the financial statements allows for better economic decision making. Globally. Horizontal Analysis Overview Horizontal analysis is the comparison of historical financial information over a series of reporting periods, or of the ratios derived from this financial information. The intent is to see if any numbers are unusually high or low in comparison to the information for br.
If your business is brand new, you'll have to wait until you've drawn up financial statements for a couple of different reporting periods, so that you have enough data to work with.