Vertical Alignment Between Hospitals and Physicians as a Bargaining Response to Commercial Insurance Markets
- 343 Downloads
The relationship between physicians and hospitals has dramatically changed over the last decade, with the employer–employee model supplanting the traditional model of private physicians with hospital admitting privileges. We examine the motivation for this form of vertical integration by considering physician–hospital alignment as a tool to increase bargaining power with private insurers. We find a positive and significant relationship between private insurance concentration on physician–hospital alignment, which is driven predominantly by for-profit hospitals.
KeywordsVertical integration Healthcare markets Physician alignment Bargaining Health insurance
We thank Jim Burgess, Alison Cuellar, Guy David, Avi Dor, Gautam Gowrisankaran, Eric Lammers, Jim Marton, and Bob Town for insightful comments and suggestions, as well as the participants at the 2015 American Health Economics Conference, the 2015 Southeastern Health Economics Study Group, and the 2016 Allied Social Science Associations Conference. This project was supported by Grant No. R00HS022431 from the Agency for Healthcare Research and Quality. The content is solely the responsibility of the authors and does not necessarily represent the official views of the Agency for Healthcare Research and Quality.
- Alexander, J. A., Halpern, M. T., & Lee, S. Y. (1996). The short-term effects of merger on hospital operations. Health Services Research, 30(6), 827.Google Scholar
- Auten, D., & Goldman, C. M. (2006). Can nonprofit hospitals coexist with physician ownership? Modern Healthcare Magazine, October 2006.Google Scholar
- Burns, L. R., Bazzoli, G. J., Dynan, L., & Wholey, D. R. (2000). Impact of HMO market structure on physician–hospital strategic alliances. Health Services Research, 35(1 Pt 1), 101.Google Scholar
- Chang, T., & Jacobson, M. (2012). What do nonprofit hospitals maximize? Evidence from California’s seismic retrofit mandate. Working Paper.Google Scholar
- Gaynor, M., & Town, R. (2012a). Competition in health care markets. In M. Pauly, T. McGuire, & P. Pita Barros (Eds.), Handbook of health economics (Vol. 2). Amsterdam: Elsevier.Google Scholar
- Gaynor, M., & Town, R. (2012b). The impact of hospital consolidation: Update. Policy brief. Princeton: Robert Wood Johnson Foundation.Google Scholar
- Lewis, M., & Pflum, K. (2015). Diagnosing hospital system bargaining power in managed care networks. American Economic Journal: Economic Policy, 7(1), 243–274.Google Scholar
- Marsh-Dalton, C., & Warren, P. L. (2014). Outsourcing and ownership: Theory and evidence from California general care hospitals. Working Paper.Google Scholar
- MedPAC. (2013). Report to congress: Medicare and the health care delivery system. Policy Brief.Google Scholar
- The Physician’s Foundation. (2012). A survey of America’s physicians: Practice patterns and perspectives. Report.Google Scholar
- Vogt, W. B., & Town, R. (2006). How has hospital consolidation affected the price and quality of hospital care? Policy Brief. Princeton: Robert Wood Johnson Foundation.Google Scholar