Physician responses to Medicare reimbursement rates

Abstract

This paper investigates how office-based physicians respond to Medicare reimbursement changes. Using variation from an Affordable Care Act policy that increased reimbursements for office-based care in four states, we use a triple difference analysis, comparing physicians with higher and lower reimbursement changes in treated states to similar physicians in untreated states. We find two mechanisms through which physicians respond. First, the reimbursement change affected integration-physicians with larger increases in office-based reimbursement were less likely to vertically integrate with hospitals and more likely to continue providing office-based care than physicians with smaller reimbursement increases. Second, we find some evidence that physicians who continued practicing in an office setting increased the volume of services provided.

Keywords: Medicare; Physician reimbursement; Vertical integration.