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

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  • Whaley, Christopher M.
  • Zhao, Xiaoxi

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.

Suggested Citation

  • Whaley, Christopher M. & Zhao, Xiaoxi, 2024. "The effects of physician vertical integration on referral patterns, patient welfare, and market dynamics," Journal of Public Economics, Elsevier, vol. 238(C).
    • Handle: RePEc:eee:pubeco:v:238:y:2024:i:c:s0047272724001117
    DOI: 10.1016/j.jpubeco.2024.105175
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    More about this item

    Keywords

    Vertical integration; Referral patterns; Market concentration;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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