Physician Market Structure, Patient Outcomes, and Spending: An Examination of Medicare Beneficiaries

Objective

To understand the impact of changes in physician market structure on clinical outcomes and health care utilization.

Data Sources

2005–2012 Medicare fee‐for‐service claims and enrollment data.

Study Design

We consider the effect of cardiology market structure on utilization and health outcomes for four patient populations. We estimate the risk‐adjusted impact of competition using multivariate regression models.

Principal Findings

The study finds that an increase in consolidation leads to statistically and economically significant increases in negative health outcomes. For example, we find that moving from a zip code at the 25th percentile of cardiology market concentration to one at the 75th percentile would be associated with 5 to 7 percent increases in risk‐adjusted mortality for three of the sample populations. We also found higher expenditures in more concentrated markets. For example, moving from a zip code at the 25th percentile of cardiology market concentration to one at the 75th would be associated with 7 to 11 percent increases in expenditures, depending on sample population.

Conclusions

Our estimates indicate that increases in cardiology market concentration are associated with worse health outcomes and higher health care expenditures. Some effects may be attributed to vertical as well as horizontal changes.