Efficiency in Organizational Structure?

A growing trend in US healthcare markets is vertical integration between hospitals and physicians. While vertical alignment is argued to promote efficiencies, the evidence is unclear. Using a 100% national sample of Medicare data, we estimate the impacts of hospital-physician integration using parametric and nonparametric quantile differences-in-differences approaches. We find that vertical integration does not lead to a mean-level declines in total spending or resource use. However, those in the top quartile of healthcare spending risk experience more testing, hospitalizations, and emergency department visits. These findings underscore the importance of capturing net as well as heterogeneous effects of vertical integration.