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Principal-agent concerns have led to a patchwork of medical regulations, including prohibitions on certain provider financial arrangements. However, ambulatory surgery centers (ASCs), which compete with hospitals, have physician investors that are controversially shielded from such "anti-kickback" laws. It is unknown whether ASC ownership perversely affects physician behavior. We combine novel facility ownership data with all-payer hospital discharge data as well as a 100% sample of Medicare claims to show that physicians strongly substitute away from hospital settings toward ASCs following their investments. We find no evidence of patient cream skimming or care quality erosion. Medicare, specifically, spends less on net.

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