Hospital Pricing Following Integration with Physician Practices

Abstract

The past decade has witnessed a new wave of hospital-physician integration, with the fraction of hospitals owning any office-based physician practice increasing from 28% in 2009 to 53% in 2015 nationwide. We offer one of the first hospital-level longitudinal analyses in examining how hospital-physician integration affects hospital prices in the modern healthcare environment. We find a robust 3-5% increase in hospital prices following integration. There is little indication that hospital quality is commensurately higher or that patient mix has changed following integration. Our supplementary analyses point to stronger bargaining leverage and foreclosure of rival hospitals as potential mechanisms for the estimated price effects.

Keywords: Bargaining leverage; Foreclosure; Hospital pricing; Physician practice; Vertical integration.