Med Inc.: How Consolidation Is Shaping Tomorrow's Healthcare System. - book reviews

Healthcare Financial Management, Dec, 1999 by Marilyn C. Ho

In the preface to Med Inc., Sandy Lutz, Woodrin Grossman, and John Bigalke introduce what they regard as the impetus for consolidation in the healthcare industry: there is money to be made in health care. The authors regard consolidation as a solution to the challenges of declining margins and pressures to manage costs to increase profits. They coin the term "Med Inc." to characterize the model of corporate health care toward which many healthcare organizations are striving.

The authors identify capital, information, risk, and government regulation as the critical factors that must be well managed if consolidation is to succeed. They recognize that there is no simple prescription for managing all of these areas. Rather than attempt to provide such a prescription, therefore, they draw on the experiences of actual healthcare organizations to serve as examples of successful and unsuccessful approaches to consolidation.

The book has two minor shortcomings. First, the authors display a strong bias in favor of consolidation. As a result, they fail to adequately consider the potential negative effects of consolidation, such as reduced healthcare access and quality of care and greater dissatisfaction among patients and providers. Second, recent changes in the financial performance of physician practice management companies (PPMCs) have caused the section of the book dealing with the PPMC sector of the healthcare industry to be somewhat out of date. Nonetheless, the discussion of PPMCs provides an interesting perspective on the emergence of these organizations and Wall Street's initial significant interest in them.

Reviewed by Marilyn C. Ho, CHFP, senior associate, Triage Consulting Group, San Francisco, California, and a member of HFMA's Northern California Chapter.