Hospital-physician integration and Medicare's site-based outpatient payments

Health Serv Res. 2021 Feb;56(1):7-15. doi: 10.1111/1475-6773.13613.


Objective: To determine the relationship between Medicare's site-based outpatient billing policy and hospital-physician integration.

Data sources: National Medicare claims data from 2010 to 2016.

Study design: For each physician-year, we calculated the disparity between Medicare reimbursement under hospital ownership and under physician ownership. Using logistic regression analysis, we estimated the relationship between these payment differences and hospital-physician integration, adjusting for region, market concentration, and time fixed effects. We measured integration status using claims data and legal tax names.

Data collection: The study included integrated and non-integrated physicians who billed Medicare between January 1, 2010, and December 31, 2016 (n = 2 137 245 physician-year observations).

Principal findings: Medicare reimbursement for physician services would have been $114 000 higher per physician per year if a physician were integrated compared to being non-integrated. Primary care physicians faced a 78% increase, medical specialists 74%, and surgeons 224%. These payment differences exhibited a modest positive relationship to hospital-physician vertical integration. An increase in this outpatient payment differential equivalent to moving from the 25th to 75th percentile was associated with a 0.20 percentage point increase in the probability of integrating with a hospital (95% CI: 0.0.10-0.30). This effect was slightly larger among primary care physicians (0.27, 95% CI: 0.18 to 0.35) and medical specialists (0.26, 95% CI: 0.05 to 0.48), while not significantly different from zero among surgeons (-0.02; 95% CI: -0.27 to 0.22).

Conclusions: The payment differences between outpatient settings were large and grew over time. Even routine annual outpatient payment updates from Medicare may prompt some hospital-physician vertical integration, particularly among primary care physicians and medical specialists.

Keywords: Medicare Payment Advisory Commission; delivery system organization; hospital workforce; hospital‐physician vertical integration; outpatient care delivery; physician employment.

Publication types

  • Research Support, U.S. Gov't, P.H.S.

MeSH terms

  • Ambulatory Care / economics
  • Efficiency, Organizational / statistics & numerical data
  • Hospital-Physician Joint Ventures / economics*
  • Humans
  • Medicare / economics*
  • Pain Management / economics*
  • Practice Patterns, Physicians' / economics*
  • Private Sector / economics
  • Reimbursement Mechanisms / economics*
  • United States