Health System

Key facts

Federal research definition

AHRQ Compendium of U.S. Health Systems

AHRQ minimum

At least one hospital and one physician group, commonly owned or managed

Ownership types

Nonprofit, for-profit and government

Merger review

FTC and DOJ antitrust review, with HSR Act premerger notification

What is a health system?

Health systems range from a pair of community hospitals with an affiliated medical group to national organizations with dozens of hospitals across many states. Most include hospitals, employed or affiliated physicians and outpatient centers, and many add post-acute services, pharmacies or a health plan.

There is no license for a health system. Hospitals keep their own state licenses and CMS Certification Numbers, physician practices bill under their own tax identification numbers and NPIs, and the system connects them through ownership, management contracts or membership. Researchers at the Agency for Healthcare Research and Quality (AHRQ) define a health system as at least one hospital and at least one physician group connected through common ownership or joint management.

How health systems are structured

A typical system has several layers:

• Parent organization: often a nonprofit corporation or holding company with a system board.
• Member hospitals: each licensed and Medicare-certified, with system home office costs allocated into their Medicare cost reports.
• Physician enterprise: employed medical groups, foundation models in states that restrict physician employment, and clinically integrated networks of affiliated independent physicians.
• Ancillary businesses: ambulatory surgery centers, imaging centers, home health agencies, specialty pharmacies and sometimes a health plan.

Why health systems matter

Many decisions that once sat with individual hospitals are now made at the system level:

• Purchasing, formulary and technology decisions are increasingly centralized, so pharma, device and health IT teams sell to systems rather than single hospitals.
• System affiliation shapes referral patterns, because employed physicians tend to refer within their system.
• Payer network teams negotiate with a system as one entity, and system size affects negotiated prices.
• CMS publishes ownership data for Medicare-enrolled hospitals and nursing homes, which helps roll facilities up to parents, but no single federal file maps every facility and practice to its system.