Vertical integration in the Australian community care setting: Can it work? A theoretical review of current literature.

Abstract

Vertical integration (VI) is considered a strategic management plan whereby an organisation has ownership of its supply chain. It is utilised as a method for managing the economic needs and approaches of an organisation and ensuring that a product is readily available for use. From a healthcare perspective, this pertains to the coordination of services or levels of care and allows for adaptation to changing circumstances. This study reviews existing literature on VI in a healthcare setting to assess feasibility and effectiveness of this proposed solution. A theoretical literature review was performed utilising conceptual categorisation to understand how VI may benefit community care organisations, using the needs of a local organisation as an example. Seventeen articles were included from a range of databases and grey literature with findings categorised according to two research questions. The findings suggest that for VI to be effective and efficient it is important to consider the following themes: market failure, barriers to entry, productive capabilities and specific healthcare issues. In conclusion, from a management and economic perspective, when markets are not functioning efficiently and are in disequilibrium, VI may provide an appropriate avenue to address these problems, in particular for community care organisations.