The effects of physician vertical integration on referral patterns, patient welfare, and market dynamics

Christopher M. Whaley and Xiaoxi Zhao

Journal of Public Economics, 2024, vol. 238, issue C

Abstract: The growth of physician vertical integration raises concerns about distorted referral patterns, higher spending, and market foreclosure. Using 100% Medicare data, we combine reduced-form analysis with a discrete choice model to estimate the effects of physician vertical integration on patients’ provider choices and welfare for two common “downstream” surgical procedures. Physician–hospital integration results in an approximately 10% increase in referrals to higher-priced facilities instead of lower-priced providers. Our counterfactual analysis implies that if all primary care physicians become integrated, total Medicare spending will increase by $315 million.

Keywords: Vertical integration; Referral patterns; Market concentration (search for similar items in EconPapers)
JEL-codes: I11 I18 L40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:238:y:2024:i:c:s0047272724001117

DOI: 10.1016/j.jpubeco.2024.105175

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