Physician Consolidation and Incentives in Childbirth

The resurgence of Physician Practice Management Companies (PPMCs) has contributed to increasing physician consolidation across the United States. PPMCs take various organizational forms but generally consolidate private medical practices under a single tax identification number to create a large group practice. Each member physician retains control over the clinical aspects of their medical practice, and the PPMC manages all business services and negotiates physician payment contracts with insurers. Using panel data on Obstetricians and Gynecologists (Ob-Gyns) from Florida, this is the first paper to empirically estimate the impact of PPMCs on health care provision and patient outcomes. I adapt a model of physician-induced demand to develop testable predictions of how the transition from a traditional medical practice into a PPMC affects treatment decisions in childbirth. To identify these decisions, the empirical analysis exploits the staggered entry of practices into three large PPMCs between 2006 and 2014. The data links inpatient discharge records, hospital financial data, physician survey data, corporate filings and physician websites. Preliminary results suggest birth outcomes are significantly affected by organizational form. I explore mechanisms such as time spent on patient care and financial incentives that may explain these empirical patterns.