Are Closer Physician-Insurer Affiliations Associated with Higher Quality?: Early Evidence from Medicare Advantage

Background: Vertical integration between health insurers and providers is becoming increasingly widespread. Evidence on the quality and cost implications of this type of integration is mixed. We assess whether closer affiliations between insurers and physicians were associated with higher quality in the context of Medicare Advantage (MA).

Data Sources: We used data on 2014 MA “encounters” submitted by insurers to the Centers for Medicare and Medicaid Services (CMS). The analytic database for 2014 includes 600,329 physicians across 119 insurers. Data were merged with quality star ratings as well as physician characteristics in the Medicare Data on Provider Practice and Specialty file.

Study Design, Methods, Measures, and Data: We used regression analysis to quantify the association between MA contract quality and two contract-level measures of insurer-physician affiliation. First, we measure MA “penetration,” the percentage of a physician’s Medicare business which was through MA. Second, we capture “insurer share” as the percentage of a physician’s MA business with a specific insurer. Our main data source was 2014 MA encounters (analogous to Traditional Medicare (TM) claims data) submitted by insurers to the Centers for Medicare and Medicaid Services (CMS). The analytic database includes 600,329 physicians across 119 insurers. These data were merged with CMS data on MA plan quality as well as physician characteristics.

Results: In 2014, the average physician participating in MA had close to half of their Medicare business in MA vs. TM; within their MA business, they had close to half with one insurer. MA penetration and insurer share were both associated with higher contract quality. Further, the impact of affiliation on quality was especially pronounced in contracts with a high proportion of vulnerable enrollees. Tighter affiliations may lead to improved alignment of physician and insurer incentives; in turn, insurers to be more likely to invest in quality improvement processes and any such initiatives may be more effective. In addition, closer insurer-physician relationships may facilitate other managerial, organizational, or technological innovations, which may be associated with improved quality.

Conclusions: Closer affiliation between insurers and physicians was associated with higher quality of care overall and especially among vulnerable populations.