PATIENT PREFERENCES FOR PHYSICIAN GROUP PRACTICE

Physician practice structure has changed dramatically in recent years with physicians increasingly organizing into single or multispecialty groups - a trend that is likely to continue due in part to incentives created by the Affordable Care Act. While these trends raise questions about how consolidation of physician practices will affect prices and demand for health care services, the availability of new datasets has made these questions increasingly tractable. This project examines patient preferences for physician group practice, providing new evidence on the effects of changes in market organization. 

We model patient choice of physician using a standard discrete choice framework.  The utility a consumer derives from a visit with a particular physician is a function of the characteristics of the physician, including the price of a visit, the characteristics of the patient, and the interaction of patient and physician characteristics. The physician characteristics of primary interest are the size and composition of the organization in which the physician works and the travel time from the patient’s residence to the physician’s office.  Patients evaluate the utility associated with each physician in the choice set and choose the one with the highest utility.  Assuming a logistic distribution for the error term, we estimate the model by maximum likelihood. 

Our analysis is based on data from Medicare claims from 2005 to 2010.  Using ZIP codes to identify the locations of patients and providers, we define the patient’s choice set as the set of providers located within 100 miles of the patient. The Medicare claims report the tax identification number (tax ID) of the physician’s practice, and, we identify a practice as a group of physicians who bill under the same tax ID. Using the physician specialty identified on the claims, we differentiate between single and multi-specialty groups. We estimate models separately by physician specialty.

Because Medicare beneficiaries generally pay little to nothing out-of-pocket for physician services, we cannot use an estimate of the effect of price on utility to denominate the effect of group size.  Following methods used in the analysis of patient choice of hospitals (Capps, Dranove et al. 2003; Capps, Dranove et al. 2010), we instead estimate the effect of travel time on utility and then use estimates of the value of travel time to convert the effects of group size on utility into dollar-denominated willingness to pay.  

In preliminary analyses, we have examined patient choice of cardiologists and general surgeons. Overall, we find that distance has a large effect on patient choice of provider.  Patients strongly prefer physicians located closer to their home. The negative effect of distance on patient utility, however, is weaker for physicians practicing in larger groups than for physicians practicing in smaller groups, particularly for physicians who are part of multi-specialty groups.

Our results indicate that the organization of physician practice affects patient utility, that patients appear to prefer physicians in group practices, and that the travel cost method is a feasible approach for estimating the value patients place on physician organizational form.