Physician and Patient Migration to Ambulatory Surgery Centers as a Response to Poor Safety at Hospitals

Recent growth in the number of physician-owned ambulatory surgery centers (ASCs) and similar specialty hospitals in the U.S. has led to research regarding overutilization of surgical services (Courtemanche and Plotzke (2010), conflicts of interest due to potential of self-referral (Mitchell (2008), Hollingsworth et al. (2010), Jon R. Gabel et al. (2008)), the consequences for healthcare costs (Barro et al. (2006)) and negligible welfare benefits (Weber (2010)). The focus of this study is to examine quality measures of hospitals, physicians and ownership relationships in the light of recent growth in the number of physician- owned surgery Centers (ASCs). The key questions that we ask are: what role does patient safety at the hospitals play in the choice of practice-setting by the physicians and how does the profit-motive (for doctors with ownership shares) affect this relationship? We exploit as 15-year trend in migration of physicians from hospital outpatient departments (HOPD) to ASC settings and utilize detailed physician-level ownership information for our analysis.

We hypothesize - 1) that the migration of physicians and patient referrals is, at least in part,  a response to poor safety at the hospital, and 2) that the high quality physicians are more likely to lead the change and therefore, may be at the forefront of this migration. Preliminary results indicate that when hospitals are found to have above-normal rates of unnecessary patient care complications (that are unrelated to patient medical condition), the likelihood of physician migration increases by as much as 41 percent. Further, we find that high quality physicians are more likely to choose ASCs over HOPDs when referring them for outpatient procedures. Finally, we find that physicians who have an ownership interest in an ASC are significantly more likely than non-owners to respond to poor performance by the hospital where they have been practicing. The magnitudes of responses, however, vary across types of ownership arrangements.

Key words: Ambulatory Surgical Centers, Hospital Safety, Physician Ownership and Joint Ventures

JEL Classification: I11, L50