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Does Multispecialty Practice Enhance Physician Market Power?
American Journal of Health Economics
|June 11, 2021
Summary
Vertical integration in healthcare, where providers share ownership, can increase physician market power. This study found that integrated general practitioners and specialists charged higher prices, especially in concentrated markets.
Area of Science:
- Health economics
- Market competition analysis
- Healthcare provider integration
Background:
- Vertical integration in healthcare involves common ownership of complementary services.
- Such integration may lead to both pro- and anti-competitive outcomes.
- Understanding its impact on pricing and market power is crucial.
Purpose of the Study:
- To investigate the relationship between vertical integration of physicians and healthcare prices.
- To determine how market concentration influences the pricing effects of integration.
- To assess whether multispecialty practices enhance physician market power.
Main Methods:
- Utilized data from 40 million commercially insured individuals via the Health Care Cost Institute (HCCI).
- Constructed price indices for office visits to general-practice and specialist physicians (2008-2012).
- Employed statistical controls for generalist and specialist market concentration.
Main Results:
- General practitioners charged higher prices when integrated with specialists, particularly in concentrated specialist markets.
- Specialists charged higher prices when integrated with general practitioners, especially in concentrated generalist markets.
- Integration effects on pricing were amplified by higher market concentration.
Conclusions:
- Multispecialty practice, a form of vertical integration, appears to enhance physician market power.
- This suggests potential implications for healthcare costs and competition.
- Further research is needed to explore the broader economic consequences.
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