Two overarching frameworks compete to address the organizational ills of the health care system. One framework diagnoses lack of coordination and prescribes integration and global payment. The other diagnoses loss of focus and prescribes specialization and episode payment. This article, based on research and interviews, assesses how the two frameworks manifest themselves at two high-volume orthopedic hospitals in Irvine, California. The Kaiser Permanente Irvine Medical Center is part of a large and diversified health system. The Hoag Orthopedic Institute is a single-specialty facility jointly owned by the physicians and the hospital. Market outcomes, such as the merger of the Hoag specialty hospital into a larger diversified health system, suggest that Kaiser’s focus on coordination of patient care from preadmission to postdischarge is a key factor in its success. But Hoag’s specialization also leads to improved efficiencies. The integrated approach appears to be prevailing. At the same time, large diversified organizations might obtain further efficiencies by pursuing service-line strategies as described in this article—for instance, by providing incentives for efficiency and quality for each specialty and type of care.
