Examining the Distinct Effects of Structural, Financial, and Information-Sharing Integration on Hospital Costs

Hospitals are pursuing integration strategies to contain costs, but evidence remains limited. This study examined the independent associations of 3 forms of integration-structural, financial, and information sharing-with hospital costs.

Hospital fixed-effects panel regression using data from multiple sources-CMS Hospital Compare, Let's Get Healthy California, and the American Hospital Association Annual Surveys and Information Technology Supplements-for years 2014-2016.

Three integration dimensions were measured: (1) structural integration (health maintenance organization [HMO] participation rate, hospital physician employment/foundation models, and system affiliation); (2) financial integration (% of the hospital's net patient revenue paid on a shared-risk basis); and (3) information-sharing integration (use of electronic patient data received from outside sources). Hospital fixed-effects regressions with 2-way clustering by hospital and county were estimated to assess within-hospital changes in spending associated with each dimension, controlling for 3 ownership types and size.

Financial integration was associated with lower hospital spending, whereas structural and information-sharing integration showed no independent association. Considered jointly, the 3 integration dimensions were statistically significant as a group. These findings were robust to alternative specifications, including excluding HMO participation from the structural index, orthogonalizing financial integration to the other dimensions, and measuring information-sharing integration by the extent. Additional checks found no evidence that capitation adoption or the capitation share of revenue was related to lower spending.

These findings suggest that carefully designed financial incentives should be prioritized when implementing integration measures in policy and practice.