The impact of integration on outpatient chemotherapy use and spending in Medicare

Hospital-physician integration has substantially grown in the United States for the past decade, particularly in certain medical specialties, such as oncology. Yet evidence is scarce on the relation between integration and outpatient specialty care use and spending. We analyzed the impact of oncologist integration on outpatient provider-administered chemotherapy use and spending in Medicare, where prices do not depend on providers' integration status or negotiating power. We addressed oncologists' selective integration and patients' nonrandom choice of oncologists using an instrumental variables method. We found that integrated oncologists reduced the quantity of outpatient chemotherapy drugs but used more expensive treatments. This led to an increase in chemotherapy-drug spending after integration. These findings suggest that changes in treatment patterns-treatment mix and quantity-may be an important mechanism by which integration increases spending. We also found that integration increased spending on chemotherapy administration (the act of injection). This is because integration shifted billing of chemotherapy to hospital outpatient departments, where Medicare payments for chemotherapy administration are higher than those in physician offices. As integration increases, efforts should continue to assess how integration influences patient care and explore policy options to ensure desirable outcomes from integration.