For the patients in hospitals, it is important that there should be proper maintenance of quality and care, and affordable to patients. The cost of quality should not be more so that there will be no stress to the patients for the treatment. This can be done by Vertical integration in which the company expands its operations of business into various steps on the same path. For example, there is a hospital to which the medial facilities are outsourced to some other vendor. However in vertical integration, the hospital could expand its services to open up the pharmacy shop for the medicines. This could decrease the cost of the company to give its space; rather it could increase the feasibility to patients to get the medicines.
Vertical integration would be good for hospitals so that they could decrease the cost to the patients by increasing the services. There could be various advantages to vertical integration and some of them are as follows:
1. It would lower down the transaction costs that were between the vendor and the hospital, and the hospital would be able to look better after the services provided by the vendor.
2. There would be synchronization between the supply and demand of services. Whenever a service will be needed, the service would be provided. The hospital would be able to identify the trend to which the services were required in the hospital, and make arrangements accordingly.
3. There would be higher investment from hospital on the services.
4. The hospital would be able to take the monopoly step in the industry that would be able to provide all the services under one roof, rather than giving it to different vendors. It will take the strategic move in the industry for the betterment for the patients, and to decrease the cost of treatments to them.
Your post mentions monopoly which raises a question.....Is vertical integration anticompetitive?