Vertical Integration and Cream Skimming of Profitable Referrals: The Case of Hospital-Owned Skilled Nursing Facilities

David Cutler, Leemore Dafny, David C. Grabowski, Steven Lee () and Christopher Ody

No 28305, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine whether vertical integration of hospitals and skilled nursing facilities (SNFs) could lessen competition by foreclosing rival SNFs’ access to lucrative referrals. We find that it could: among integrated providers, a one percent increase in SNF reimbursement for a given patient discharged from the upstream hospital increases the self-referral rate to the hospital’s downstream SNF(s) by 1.8 percent. We find no evidence of offsetting benefits for patients and payers: these increased self-referrals have an imprecisely estimated zero effect on patient outcomes and Medicare spending.

JEL-codes: I18 L22 L40 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-com, nep-hea, nep-ias and nep-ind
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