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. 2024 Oct:238:105175.
doi: 10.1016/j.jpubeco.2024.105175. Epub 2024 Jul 25.

The Effects of Physician Vertical Integration on Referral Patterns, Patient Welfare, and Market Dynamics

Christopher M Whaley  1 , Xiaoxi Zhao  2
Affiliations

The Effects of Physician Vertical Integration on Referral Patterns, Patient Welfare, and Market Dynamics

Christopher M Whaley et al. J Public Econ. 2024 Oct.

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.

Keywords: I11; I18; L40; market concentration; referral patterns; vertical integration.

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