How Vertical Integration Affects Health Outcomes and Total Costs for Medicare Recipients

A growing literature correlates the employment of physicians by hospitals with increased spending by payers. However, less attention has gone to the question of whether or not patient outcomes are also affected. We consider whether patients affected by changes in their physicians’ employment status are paying more for better care. Using medical claims for a 5% Sample of Medicare FFS beneficiaries, we document the relationship between organizational structure on health care outcomes using both cross-sectional relationships, and changes over time linked to vertical mergers in physician markets. We measure whether complications from hypertension, diabetes and other chronic conditions are associated with measures of firm integration.