In theory, vertical integration in health care makes sense: when physicians work directly for hospitals, rather than in independent practices, there should be greater efficiencies through economies of scale, and better quality of care for patients through coordination and information sharing. And indeed, the healthcare system in the United States has been headed in that direction for years now, consolidating at a rapid rate. The number of doctors who have gone from working in independent practices to working in hospitals has doubled in the past decade and that trend continues.
But a by a group of researchers including Harvard Kennedy School Associate Professor of Public Policy Soroush Saghafian finds that in one representative area of medicine, vertical integration is leading doctors to change the way they approach patient care, with consequent adverse effects on patient health, and is also inflating costs. The problem, they conclude, lies in a system of financial reimbursements that incentivizes the wrong behavior—and addressing that issue may offer a solution.
The study was conducted by Saghafian with researchers from Harvard University, Harvard Medical School, Massachusetts General Hospital, and University College London.
Zooming in on a particular specialty and a particular procedure—colonoscopies performed by gastroenterologists in the fee-for-service Medicare program—they looked at millions of randomly selected doctor-patient interactions across a broad geographic spread and across a number of years (2008-1015). They also looked at physicians working in vertically integrated hospitals as well as independent practices.
"Analyzing more than 2.6 million patient visits, we found that physicians significantly alter their care process after they vertically integrate,” Saghafian said. “What is more, this results in substantial increase in patients’ post-procedure complications. Using our findings, we offer some levers for policymakers to mitigate these consequences of vertical integration—a fast-growing trend in the healthcare sector."