Do Medicare's Facility Fees Incentivize Hospitals to Vertically Integrate with Oncologists?

Inquiry. Jan-Dec 2021;58:469580211022968. doi: 10.1177/00469580211022968.


Within the past decade, the U.S. health care market has undergone massive vertical integration, prompting economists to study the underlying causes and consequences of hospital-physician integration. This paper examines whether or not hospitals strategically choose to vertically integrate with clinical oncologists in order to capture facility fees, a commonly cited reason for increased consolidation in the health care market. To address this question, I match data on hospitals' ownership of clinical oncologists with Medicare payment data disaggregated to the physician and specific service level. I leverage a 2014 policy change that drastically altered the payment structure of Medicare's facility fees paid to hospitals for evaluation and management services-and yet, it did not alter the direct payments made to physicians. Contrary to popular belief, I find no evidence that the financial incentives of facility fees have an effect on the probability that a hospital and a clinical oncologist vertically integrate.

Keywords: analysis of health care markets; facility fees; health economics; medicare; vertical integration.

Publication types

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

MeSH terms

  • Aged
  • Hospitals
  • Humans
  • Medicare*
  • Motivation
  • Oncologists*
  • Ownership
  • United States