Question

Explain the vertical integration options and directions for the following providers: (a) a major academic medical center such as the University of Iowa, (b) a five-person general surgery group, and (c) a manufacturer of durable medical equipment.

Answer 1

Answer:

(a) Backward vertical integration (b) Forward vertical integration (c) Backward vertical integration

Explanation:

(a) An academic medical center is an example of backward vertical integration. The specialist and faculties from the university will provide treatment to the patients. Such medical centers have tertiary service with several intermediaries.

(b) Here, there is no intermediary between patients and general surgery group. The general surgery group treat patients directly. So here there is a forward vertical integration system.

(c) A manufacturer of durable medical equipment will supply to retailers who in turn supply these to hospitals where the patients will receive service from these equipment. So, it is an example of backward vertical integration.