Does physician-hospital vertical integration signal care-coordination? Evidence from mover-stayer analysis of commercially insured enrollees

The sharp growth in physician groups being purchased by hospitals has sparked extensive policy debate, with little evidence on the merits of such integration. We fill the gap by examining care-coordination under integration. We exploit the fact that integration varies across MSAs and focus on PPO patients with employment-based moves between MSAs. We develop a mover-stayer model with heterogenous effects to examine whether vertically integrated practices treat patients differently, or whether they just treat different patients. Moving to a more integrated market causes an increase in care coordination indices. Specifically, moving to an area with more specialty care integration causes an increase in team referrals between primary and specialty care, less lab and imaging use, less out-of-network care, and reductions in spending. That is, systems are able to narrow the scope of specialty services overall, hence creating greater social efficiencies. Moving to a market with more integrated primary care causes an increase in preventive care, decreased inpatient use by women, but an increase in spending. JEL I11, L14, C22.