Effect of financial incentives on hospital‐cardiologist integration and cardiac test location

Starting around 2006, the Centers for Medicare and Medicaid Services (CMS) progressively reduced Medicare Fee‐for‐Service (M‐FFS) payments for the principal noninvasive cardiac tests, when performed in a cardiologist office (Office), yet kept payments flat to increasing for the same tests, performed in the hospital‐based outpatient (HBO) setting. This produced a growing gap between HBO and Office payments for the same tests, and thus an incentive for hospitals to acquire cardiology practices in order to move cardiac tests to the HBO location and capture the HBO/Office payment differential. We use difference‐in‐differences analysis, in which we compare national M‐FFS trends in cardiac test location to those for a control group of several large, integrated Medicare Advantage (M‐Adv) health systems over 2005–2015, which were not affected by these reimbursement changes, and provide evidence that these reimbursement changes led to a large shift in testing from Office to HBO. This shift was concurrent with a sharp rise in hospital‐cardiologist integration. The rise in integration and the proportion of testing in HBO varied greatly across states. Independent practice remains viable in very large states, but is endangered in many states, and is all but extinct in a growing number of states.