The Role of Physician Integration in Alternative Payment Models: The Case of the Comprehensive Joint Replacement Program

Abstract

In the U.S., physicians are increasingly integrating horizontally as well as vertically, while payment models are simultaneously transitioning away from fee-for-service towards alternative payment models (APM). While both are known to alter providers' financial incentives and affect cost and quality individually, their interactions have potential consequences for regulation of provider integration and APM design and evaluation. In this paper, we empirically examine the role of both horizontal and vertical integration of orthopaedic surgeons in driving heterogeneity in the impact of the Comprehensive Joint Replacement (CJR) alternative payment program. Using a quasi-experimental difference-in-difference-in-differences approach, we find CJR hospitals with high horizontal and vertical integration see an increase in both hospital costs and risk-adjusted complication rates of 3.17% & 1.18, respectively, while others see either a decrease or no change in these measures. Moreover, we present evidence showing integration affects physician care decisions regarding length-of-stay and discharge disposition that explain the changes in costs and quality. Our findings provide novel insights into provider integration and clinical decisions that are relevant for policymakers, payors, and healthcare providers.

Note:
Funding Information: None.

Conflict of Interests: None.

Keywords: alternative payment models, physician integration, healthcare operations, empirical healthcare