Provider Integration and Treatment Choice: Evidence from Cardiologists

I study the influence of integration between cardiac surgeons and cardiologists on treatment decisions made by cardiologists after diagnosing cardiac patients. After undergoing cardiac catheterizations, patients undergo one of three courses of treatment: medical management, percutaneous coronary intervention (PCI), and cardiac bypass (CABG). Financial integration between surgeons and cardiologists is expected to increase the number of patients receiving bypass, but has an ambiguous theoretical effect on patient outcomes and utilization. Better information sharing between integrated physicians may yield improved outcomes through better allocation of patients to treatments or post-operation follow-up. However, financial incentives may lead to patients being referred for unnecessary surgeries.

Using Medicare claims from 2008-2012, I show that when a diagnosing cardiologist works in the same practice as a cardiac surgeon, their patients are 5.5% more likely to receive bypass than alternative treatments. Baseline results use a fixed effects framework, utilizing within-cardiologist variation in integration over time. This increase is driven almost entirely by shifting patients from medical management to interventional treatment, rather than a re-allocation of patients from PCI to CABG. This shift increases 1-year patient inpatient utilization following diagnosis by 2.9%, but decreases 1-year patient mortality by 0.28pp.