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How vertical integration affects the quantity and cost of care for Medicare beneficiaries

Author

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  • Koch, Thomas G.
  • Wendling, Brett W.
  • Wilson, Nathan E.

Abstract

Health systems are employing physicians in growing numbers. The implications of this trend are poorly understood and controversial. We use rich data from the Centers for Medicare and Medicaid Services to examine the effects of a set of physician acquisitions by hospital systems on outpatient utilization and spending. We find that financial integration systematically produces economically large changes in the acquired physicians’ behavior, but has less consistent effects at the acquiring system level.

Suggested Citation

  • Koch, Thomas G. & Wendling, Brett W. & Wilson, Nathan E., 2017. "How vertical integration affects the quantity and cost of care for Medicare beneficiaries," Journal of Health Economics, Elsevier, vol. 52(C), pages 19-32.
    • Handle: RePEc:eee:jhecon:v:52:y:2017:i:c:p:19-32
    DOI: 10.1016/j.jhealeco.2016.12.007
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Leila Agha & Keith Marzilli Ericson & Xiaoxi Zhao, 2020. "The Impact of Organizational Boundaries on Healthcare Coordination and Utilization," NBER Working Papers 28179, National Bureau of Economic Research, Inc.
    2. Jonathan Zhang & Yiwei Chen & Liran Einav & Jonathan Levin & Jay Bhattacharya, 2021. "Consolidation of primary care physicians and its impact on healthcare utilization," Health Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 1361-1373, June.
    3. Richards, Michael R. & Seward, Jonathan A. & Whaley, Christopher M., 2022. "Treatment consolidation after vertical integration: Evidence from outpatient procedure markets," Journal of Health Economics, Elsevier, vol. 81(C).
    4. Stephen Rocks & Daniela Berntson & Alejandro Gil-Salmerón & Mudathira Kadu & Nieves Ehrenberg & Viktoria Stein & Apostolos Tsiachristas, 2020. "Cost and effects of integrated care: a systematic literature review and meta-analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(8), pages 1211-1221, November.
    5. Rong Fu & Yichen Shen & Haruko Noguchi, 2021. "The best of both worlds? The economic effects of a hybrid fee‐for‐service and prospective payment reimbursement system," Health Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 505-524, March.
    6. David Dreyfus & Anand Nair & Srinivas Talluri, 2020. "The Impact of Chain Organization Size on Efficiency and Quality of Affiliated Facilities—Implications for Multi‐Unit Organizational Forms," Production and Operations Management, Production and Operations Management Society, vol. 29(7), pages 1605-1623, July.
    7. Francine Lafontaine & Margaret E. Slade, 2021. "Presumptions in Vertical Mergers: The Role of Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(2), pages 255-272, September.
    8. Marissa Beck & Fiona Scott Morton, 2021. "Evaluating the Evidence on Vertical Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(2), pages 273-302, September.
    9. Jeah Jung & Roger Feldman & Yamini Kalidindi, 2019. "The impact of integration on outpatient chemotherapy use and spending in Medicare," Health Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 517-528, April.
    10. Brady Post & Edward C. Norton & Brent K. Hollenbeck & Andrew M. Ryan, 2022. "Hospital‐physician integration and risk‐coding intensity," Health Economics, John Wiley & Sons, Ltd., vol. 31(7), pages 1423-1437, July.
    11. Stephen McCarthy & Damien Sheehan‐Connor, 2022. "The effect of hospital‐physician integration on hospital costs," Health Economics, John Wiley & Sons, Ltd., vol. 31(11), pages 2333-2368, November.

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    More about this item

    Keywords

    Vertical integration; Mergers; Healthcare;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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