The formation of physician patient sharing networks in medicare: Exploring the effect of hospital affiliation

This study explores the forces that drive the formation of physician patient sharing networks. In particular, I examine the degree to which hospital affiliation drives physicians' sharing of Medicare patients. Using a revealed preference framework where observed network links are taken to be pairwise stable, I estimate the physicians' pair‐specific values using a tetrad maximum score estimator that is robust to the presence of unobserved physician specific characteristics. I also control for a number of potentially confounding patient sharing channels, such as (a) common physician group or hospital system affiliation, (b) physician homophily, (c) knowledge complementarity, (d) patient side considerations related to both geographic proximity and insurance network participation, and (e) spillover from other collaborations. Focusing on the Chicago hospital referral region, I find that shared hospital affiliation accounts for 36.5% of the average pair‐specific utility from a link. Implications for reducing care fragmentation are discussed.