Association Between Medicare Site-Based Payment Policy, Physician Practice Characteristics, and Vertical Integration...

Medicare's differential payments for services delivered in physician offices versus hospital outpatient settings incentivize hospital-physician integration (ie, vertical integration) across many specialties, but evidence for oncologists is mixed. We examined the association of Medicare site-based payment policy and physician practice characteristics, including service volume and diversity, with vertical integration among oncologists in 2013-2019.

Using the Medicare Provider Utilization and Payment Data and Medicare Data on Provider Practice and Specialty in 2013-2019, we extracted nonintegrated medical/hematologic oncologists (hereafter oncologists) in 2013 and followed them through 2019. We quantified the incentives from Medicare site-based payment policy using the hospital-office ratio-total Medicare payments if all services were delivered in the hospital outpatient department (HOPD) versus physician office. Vertical integration was defined as billing >10% of services to HOPD in a year. Multivariable linear probability regressions estimated the association between hospital-office ratio and vertical integration in 2014-2019 with and without accounting for provider characteristics.

In 2013, the average hospital-office ratio was 1.63, which increased to 1.99 in 2018. A 25th-to-75th percentile increase in the hospital-office ratio was negatively associated with integration (-1.01 percentage points [ppts], 95% CI = -1.45 to -0.57, p < .001) not accounting for physician practice characteristics; this association was attenuated (-0.30 ppts, 95% CI = -0.67 to 0.07, p = .11) after adjusting for these characteristics. Higher baseline (ie, 2013) service volume (Quartile4 v Quartile1 = -3.00 ppts, 95% CI = -4.42 to -1.59, p < .001), more diverse services (Quartile4 v Quartile1 = -3.55 ppts, 95% CI = -4.97 to -2.13, p < .001), and urban location (-5.23 ppts, 95% CI = -6.89 to -3.57, p < .001) were more strongly associated with vertical integration.

Compared to Medicare site-based payment policy, oncologists' practice characteristics emerged as more potent factors for integration and should be considered to ensure the intended impacts of site-based payment reform. Our finding raises questions about the effectiveness of ongoing movements toward site-neutral payment for drug administration services to deter vertical integration in oncology.