This paper explores physician-hospital integration through an examination of the dynamics of interdependence and competition in the context of health reform. Efforts at collaboration and financial alignment between hospitals and physicians will intensify with the creation of accountable care organizations (ACOs). 

As outpatient care has expanded and HMOs have taken hold in many markets, physician groups now directly provide services that historically occurred in hospitals, and hospitals work with physician groups rather than only individual physicians. Other factors that will influence physician-hospital dynamics include:

• Changes in reimbursement for specific services
• The need for capital for new capabilities or infrastructure
• Supply and demand for specific clinical skills
• Workforce expectations and stability

The paper includes observations by hospital, physician group, and health plan leaders on the state of physician-hospital integration. It addresses the effect on patients, expected challenges with future integration, and implications for policymakers.

The complete paper is available as a Document Download.