My team is currently researching physician integration — and like so many terms in health care, this is one that can mean everything and nothing all at the same time. When we speak with organizations about their integration efforts, we find that many use the terms standardization, centralization, and integration interchangeably. 

The confusion is understandable. These terms aren’t mutually exclusive and there are similarities between them — each of the three approaches can be used to scale, improve inefficiencies and reduce costs for your organization. However, despite their similarities, they each solve a different type of problem so it’s crucial to know which one to deploy depending on the challenge at hand. Below, we explore how to differentiate between the three approaches and questions to consider with each.  

Standardization is establishing consistent and uniform processes. Some variation is natural but standardization combats waste and inefficiencies by eliminating “unwarranted” variation. This is variation that serves no purpose, and at worst, is costing you money. Standardization is the most foundational of the three terms. For some problems, stopping at standardization is enough. In other instances, standardization is used to lay the groundwork for centralization and integration.  

Before you standardize…

• What beneficial variation should you keep?  
• How will you make sure people follow the new standards?  
• If you standardize one process, do you need to standardize other related processes? 

Centralization is concentrating resources to support multiple locations or functions.  The centralized function has a narrower scope of focus than the individual locations that it supports. This narrower scope allows centralized functions to operate in fewer locations, with more efficiency, or for staff to have more specified roles and responsibilities.  In an increasingly tight economy and labor market, when done well, centralization can be a golden ticket for stretching limited resources and personnel.

Before you centralize…

• Can you staff the centralized function in a way that will reduce operating costs?
• How will you account for any locally controlled functions that might remain? 
• What impacts will centralization have on the broader organizational structure, outside of the business lines directly involved?

Integration is bringing together the things you own into a single, highly coordinated entity.  You can integrate entities that are alike (e.g., two physician groups) as well as entities that are different (e.g., a health plan and a physician group). With the abundance of M&A activity going on, we’re now seeing an uptick in organizations working to integrate their newly acquired assets. Integration is the most all-encompassing of the three terms since the unification of multiple entities often involves both standardization and centralization.  

Before you integrate…

• Are there things that need to be standardized or centralized first? 
• How can integration work to support your broader strategic goals? 
• Who will oversee the coordination and support of integration efforts?