Physician selection for hospital integration: Theoretical considerations and empirical findings

The U.S. health care system has seen an increase in hospital-physician integration, with hospitals acquiring increasing numbers of physician practices. This shift has been linked to higher costs without significant improvements in quality.

This study sought to identify the characteristics of physicians who transitioned from independent practice to hospital integration.

We used physician variables, including quality scores, medical school rankings, years of experience, experience treating socially or medically complex patients, practice style, and location, as well as health care market and county-level variables to understand these determinants using a fixed-effects logistic regression model.

A total of 101,746 physicians representing 66 clinical specialties satisfied our inclusion criteria, of which 3,656 became hospital-integrated between 2018 and 2020. The integrating physicians were generally less experienced, had lower quality scores, and generated less revenue per Medicare patient. Their patients, on average, had higher comorbidity scores, were more likely to be dually eligible, and resided in counties with higher poverty rates.

Our findings indicate that the physicians most likely to become hospital integrated are those facing reimbursement pressures due to a complex case mix and the associated challenges of performing well on the quality metrics. We also found some support for the anticompetitive aspects of hospital-physician integration. Our results suggest that hospitals are integrating with a relatively less experienced physician workforce but one that is perhaps more capable of treating clinically and socioeconomically complex patients.

Hospitals interested in using physician integration strategically to improve care quality should put more emphasis on physician quality. Such an approach has the potential to increase efficiency without sacrificing quality of care.