Ancillary Cost Implications of Physicians Multisiting and Inter‐Organizational Collaboration During Healthcare Delivery

Yingchao Lan, Deepa Goradia and Aravind Chandrasekaran

Production and Operations Management, 2022, vol. 31, issue 2, 561-582

Abstract: This study investigates diagnostic testing and pharmacy expenditures, commonly referred to as ancillary costs in the United States acute‐care hospitals. These ancillary costs are charges associated with services provided to support patient treatment, including laboratory, radiology, and pharmacy charges. Despite of investment in inter‐organizational and technological collaboration practices, these costs continue to rise. Our research examines the role of individual healthcare providers, namely multisiting physicians, who practice at more than one hospital, in reducing ancillary cost. We also look at how inter‐organizational collaboration measured by the hospital's affiliation in an accountable care organization (ACO) model affect this relationship. To do this, we assembled a unique data set of 163,617 patients treated by 4411 physicians at 182 hospitals in Florida from 2014 to 2016. Using an econometric estimation approach accounting for endogeneity, we find that patients treated by multisiting physicians experienced, on an average, per‐hospitalization reduction in laboratory and radiology charges of 58.57% and 30.11%, respectively. These savings increase when multisiting physicians have less practice experience. We also find that hospitals participating in ACO model complement the savings achieved through multisiting physicians in the form of even lower pharmacy costs. In post‐hoc analyses, we find such cost reduction comes from reducing the total number of procedures or tests ordered. We also show that the lower treatment charges do not compromise the clinical quality of patients treated by multisiting physicians. Collectively, the findings offer important insights to the healthcare operations management literature on the interaction between individual‐organizational collaboration efforts and patient‐level outcomes.

Date: 2022
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