Association of a Medicare Outpatient Payment Reform With Hospital-Primary Care Integration: Heterogeneity Across Markets and Physicians

Abstract

Background: Hospital-physician integration increased rapidly in the past decade, threatening the affordability of care with minimal gains in quality. Medicare recently reformed its facility fee payments to hospitals for office consultations delivered by hospital-integrated physicians. This policy reform, affecting 200 million office visits annually, may have inadvertently encouraged hospitals to integrate with certain primary care physicians.

Objective: The objective of this study was to determine whether the policy reform was associated with hospital-primary care integration.

Research design: I used a large sample of primary care physicians (n=98,884) drawn from Medicare claims data. I estimated cross-sectional multivariable linear probability models to measure whether the change in physicians' value-to-hospitals was associated with integration.

Results: The reform created heterogenous results: some physicians' value-to-hospitals decreased, while others increased (first percentile to 99th percentile, -$16,000 to $47,000). This change in value had a small association with integration: for every $10,000 increase, a physician was about 0.34 percentage points (95% confidence interval: 0.16-0.52) more likely to become integrated. Among high-volume physicians, the reform had larger effects: physicians whose value-to-hospitals grew by $20,000 or more were nearly 3 percentage points more likely to become integrated. Changes in value had no effect in concentrated hospital markets and rural areas.

Conclusions: Effects of Medicare's site-based payments on hospital-primary care integration were concentrated among a small subset of physicians. Reforms to Medicare payment policy could influence integration among this group.