Hospital ownership of physician practices has grown across the US, and these strategic decisions seem to drive higher prices and spending. Using detailed physician ownership information and a universe of Florida discharge records, we show novel evidence of hospital-physician integration foreclosure effects within outpatient procedure markets. Following hospital acquisition, physicians shift nearly 10% of their Medicare and commercially insured cases away from ambulatory surgery centers (ASCs) to hospital outpatient departments and are up to 18% less likely to use an ASC at all. Distorting physician choices over treatment setting can generate allocative inefficiencies and forgo state and federal tax revenue.
This research was funded by the National Institutes on Aging and conducted by RAND Health Care.
This report is part of the RAND Corporation working paper series. RAND working papers are intended to share researchers' latest findings and to solicit informal peer review. They have been approved for circulation by RAND but may not have been formally edited or peer reviewed.
Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.