Review of Industrial Organization

, Volume 53, Issue 1, pp 7–29 | Cite as

Vertical Alignment Between Hospitals and Physicians as a Bargaining Response to Commercial Insurance Markets

  • Ian McCarthyEmail author
  • Sean Shenghsiu Huang


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.


Vertical 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.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Department of EconomicsEmory University and NBERAtlantaUSA
  2. 2.Department of Health Systems AdministrationGeorgetown UniversityWashingtonUSA

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