Accumulation, Autonomy, and Expectations

Three Essays on the Impact of U.S. Health Care Industry Consolidation

by Claire E. O'Hanlon

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The U.S. health care industry in the 21st century has been characterized by consolidation. Consolidation, and the resulting increased market concentration, can result in the ability of health care entities to engage in monopolistic pricing behaviors. Consolidation has been found often not to benefit patients and consumers in terms of lower prices, and has mixed effects on health care quality. However, health care consolidation's impacts on other outcomes, like access to health care and physician satisfaction, are largely unknown, but anecdotal evidence from communities where consolidation has occurred indicate that these impacts exist and are of concern. This dissertation aims to augment the existing evidence base on the consequences of and policy remedies for health care consolidation in three essays. The first essay uses secondary data to provide evidence on the impact of consolidation on physician social networks, the characteristics of which are associated with measurable outcomes such as costs and quality, as well as more distal outcomes like access to information and organizational effectiveness. The stability of shared patient networks increases significantly after acquisition of physician practices by another practice, which has potentially positive implications for organizational effectiveness. However, consistent and notable effects of consolidation on the size and strength of shared patient networks were not observed. The second essay uses case study methods to do a deep dive into a single market (Pittsburgh, Pennsylvania) that has experienced an intense, protracted period of consolidation to understand the breadth of the potential effects of cumulative consolidation events. The observed negative outcomes are largely attributable to three distinct pathways: the loss of physician autonomy when employed by large systems; the accumulation of information, resources, and power by large systems; and the high expectations to which large systems are held. The third essay explores alternative policy solutions for addressing consolidation and its negative consequences. Potentially impactful solutions are increased restrictions on allowable insurance contracting language and alteration of non-profit status requirements. Understanding these impacts of consolidation is critical, not just for policymakers and regulators, but also for health care purchasers, employees, taxpayers, and other stakeholders in communities that are experiencing or anticipating consolidation in their local health care markets so that they can prepare for or mitigate its negative consequences.

Table of Contents

  • Chapter One

    U.S. Health Care Industry Consolidation as a Policy Problem

  • Chapter Two

    Effect of Practice Consolidation on Physician Shared Patient Network Size, Strength, and Stability

  • Chapter Three

    The Impact of Health Care Industry Consolidation in Pittsburgh, Pennsylvania: A Case Study

  • Chapter Four

    Health Care Industry Consolidation: Remedies Beyond Antitrust

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This document was submitted as a dissertation in July 2018 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Deborah Freund (Chair), Chapin White, and Stephen Shortell.

This report is part of the RAND Corporation dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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