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Do Medicare's Facility Fees Incentivize Hospitals to Vertically Integrate with Oncologists?

ABSTRACT: Within the past decade, the U.S. health care market has undergone massive vertical integration, prompting economists to study the underlying causes and consequences of hospital-physician integration. This paper examines whether or not hospitals strategically choose to vertically integrate with clinical oncologists in order to capture facility fees, a commonly cited reason for increased consolidation in the health care market. To address this question, I match data on hospitals' ownership of clinical oncologists with Medicare payment data disaggregated to the physician and specific service level. I leverage a 2014 policy change that drastically altered the payment structure of Medicare's facility fees paid to hospitals for evaluation and management services-and yet, it did not alter the direct payments made to physicians. Contrary to popular belief, I find no evidence that the financial incentives of facility fees have an effect on the probability that a hospital and a clinical oncologist vertically integrate.

SUBMITTER: Valdez S

PROVIDER: S-EPMC8287339 | biostudies-literature | 2021 Jan-Dec

REPOSITORIES: biostudies-literature

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Do Medicare's Facility Fees Incentivize Hospitals to Vertically Integrate with Oncologists?

Valdez Samuel S

Inquiry : a journal of medical care organization, provision and financing 20210101

Within the past decade, the U.S. health care market has undergone massive vertical integration, prompting economists to study the underlying causes and consequences of hospital-physician integration. This paper examines whether or not hospitals strategically choose to vertically integrate with clinical oncologists in order to capture facility fees, a commonly cited reason for increased consolidation in the health care market. To address this question, I match data on hospitals' ownership of clin ...[more]

PMID: 34269086

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Project description:Background and objectivesPeritoneal dialysis is a self-administered, home-based treatment for ESKD associated with equivalent mortality, higher quality of life, and lower costs compared with hemodialysis. In 2011, Medicare implemented a comprehensive prospective payment system that makes a single payment for all dialysis, medication, and ancillary services. We examined whether the prospective payment system increased dialysis facility provision of peritoneal dialysis services and whether changes in peritoneal dialysis provision were more common among dialysis facilities that are chain affiliated, located in nonurban areas, and in regions with high dialysis market competition.Design, setting, participants, & measurementsWe conducted a longitudinal retrospective cohort study of n=6433 United States nonfederal dialysis facilities before (2006-2010) and after (2011-2013) the prospective payment system using data from the US Renal Data System, Medicare, and Area Health Resource Files. The outcomes of interest were a dichotomous indicator of peritoneal dialysis service availability and a discrete count variable of dialysis facility peritoneal dialysis program size defined as the annual number of patients on peritoneal dialysis in a facility. We used general estimating equation models to examine changes in peritoneal dialysis service offerings and peritoneal dialysis program size by a pre- versus post-prospective payment system effect and whether changes differed by chain affiliation, urban location, facility size, or market competition, adjusting for 1-year lagged facility-, patient with ESKD-, and region-level demographic characteristics.ResultsWe found a modest increase in observed facility provision of peritoneal dialysis and peritoneal dialysis program size after the prospective payment system (36% and 5.7 patients in 2006 to 42% and 6.9 patients in 2013, respectively). There was a positive association of the prospective payment system with peritoneal dialysis provision (odds ratio, 1.20; 95% confidence interval, 1.13 to 1.18) and PD program size (incidence rate ratio, 1.27; 95% confidence interval, 1.22 to 1.33). Post-prospective payment system change in peritoneal dialysis provision was greater among nonurban (P<0.001), chain-affiliated (P=0.002), and larger-sized facilities (P<0.001), and there were higher rates of peritoneal dialysis program size growth in nonurban facilities (P<0.001).ConclusionsMedicare's 2011 prospective payment system was associated with more facilities' availability of peritoneal dialysis and modest growth in facility peritoneal dialysis program size.PodcastThis article contains a podcast at https://www.asn-online.org/media/podcast/CJASN/2018_11_19_CJASNPodcast_18_12_.mp3.

Project description:BackgroundThe Comprehensive Care for Joint Replacement (CJR) model is an alternative Medicare payment model for joint replacement that mandated participation by hospitals in randomly selected Metropolitan Statistical Areas (MSAs). On average, the program decreased inpatient length of stay and increased home discharge rates. It is unclear if these effects differed based on hospital ownership type, even though ownership may impact care redesign opportunities.MethodsWe used the 2014-2017 California Patient Discharge Datasets. The study included 113,590 hospitalizations for hip and knee joint replacement from 287 hospitals in the treated and control MSAs in California. The primary outcomes were inpatient length of stay and home discharge rates. Home discharge status included self-care, the use of home health, and hospice care at home. To determine whether the impact of the CJR model differed by hospital ownership type, we used event study, difference-in-differences (DID), and triple differences (DDD) models to estimate changes in health care services utilization in treated relative to control areas before versus after CJR implementation (April 2016) by hospital ownership type.ResultsOf the 113,590 hospitalizations, 51,708 (45.52%) were in treated MSAs and 61,882 (54.48%) were in control MSAs; 81,649 (71.88%) were from nonprofit hospitals, 20,247 (17.82%) were from for-profit hospitals, and 11,694 (10.29%) were from government-owned hospitals. DID analyses showed that after policy implementation, nonprofit and for-profit hospitals experienced a decrease in inpatient length of stay of 0.02 days (95% CI, -0.04 to -0.01) and 0.04 days (95% CI, -0.06 to -0.01), respectively, while government-owned hospitals experienced an increase by 0.11 days (95% CI, 0.04 to 0.18). For home discharge rates, nonprofit hospitals experienced an increase of 0.02 (95% CI, 0.01 to 0.03), while other hospitals did not show statistically significant changes. DDD analyses confirmed that inpatient length of stay increased in public compared to nonprofit hospitals in treated relative to control MSAs after policy implementation.ConclusionsThe impacts of the CJR program differed by hospital ownership type. Government-owned hospitals, with their unique financial circumstances, may have faced challenges that hindered the reductions in inpatient length of stay observed in other types of hospitals under the CJR Model.

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Do Medicare's Facility Fees Incentivize Hospitals to Vertically Integrate with Oncologists?

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Do Medicare's Facility Fees Incentivize Hospitals to Vertically Integrate with Oncologists?

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