Changes in Physician Market Structure Financial and Clinical Effects Nathan E. Wilson Federal Trade Commission Bureau of Economics nwilson@ftc.gov February 2018 The views expressed are those of the speaker. They do not necessarily represent those of the Federal Trade Commission or any of its Commissioners.
Thinking About Consolidation ◮ Lots of changes to physician markets ◮ General trend of big firms getting bigger ◮ Concentration statistics tell us how organization of the industry may be changing ◮ However, they do not necessarily imply changes in competition ◮ Absent changes in competition, antitrust agencies have little scope for intervention ◮ When changes in competition are likely, antitrust enforcers worry about prices, quality N. E. Wilson (FTC) Changes in Physician Market Structure
Evidence of Widespread Horizontal Consolidation Figure: Variation in Practice Size Change Capps, Dranove, & Ody, Health Affairs , 2017 N. E. Wilson (FTC) Changes in Physician Market Structure
Local Physician Markets Show Substantial Consolidation .15 .1 Fraction .05 0 0 2000 4000 6000 8000 10000 Adjusted HHI 2005 2011 Figure: Cardiology Concentration over Time Koch, Wendling, & Wilson, Health Services Review , forthcoming N. E. Wilson (FTC) Changes in Physician Market Structure
Multiple Specialties Affected Figure: Distribution of Market Structure by Specialty, 2010 Baker, Bundorf, Royalty, & Levin, JAMA , 2014 N. E. Wilson (FTC) Changes in Physician Market Structure
Why We Care About Consolidation: Price Increases Koch & Ulrick, FTC Working Paper, 2017 N. E. Wilson (FTC) Changes in Physician Market Structure
Why We Care About Consolidation: Quality Figure: Increases in Concentration Associated with Worse Outcomes Koch, Wendling, & Wilson, Health Services Review , forthcoming N. E. Wilson (FTC) Changes in Physician Market Structure
Physician Markets Also Changing Vertically Figure: Vertical Integration Measured from Hospital Perspective Short, Ho, & McCracken, Rice University Working Paper, 2017 N. E. Wilson (FTC) Changes in Physician Market Structure
Effects of Vertical Integration Often Worrying ... Post, Buchmueller, & Ryan, Medical Care Research and Review , 2017 N. E. Wilson (FTC) Changes in Physician Market Structure
While Benefits from Vertical Integration Nebulous Diabetes complication outcomes from a linear probability model lead and lag merger coefficients and 95% confidence intervals Men .1 .1 .1 Severe diabetes complications Mild diabetes complications 0 0 0 Glaucoma −.1 −.1 −.1 −.2 −.2 −.2 −20 −10 0 10 20 −20 −10 0 10 20 −20 −10 0 10 20 Quarters since merger Quarters since merger Quarters since merger Women .1 .1 .1 Severe diabetes complications Mild diabetes complications 0 0 0 Glaucoma −.1 −.1 −.1 −.2 −.2 −.2 −20 −10 0 10 20 −20 −10 0 10 20 −20 −10 0 10 20 Quarters since merger Quarters since merger Quarters since merger Koch, Wendling, & Wilson, work in progress, 2018 N. E. Wilson (FTC) Changes in Physician Market Structure
Conclusion ◮ Physician markets experiencing considerable horizontal and vertical consolidation ◮ Scholarly literature suggests that consolidation often leads to higher spending and/or prices ... with no consistent evidence of substantial clinical efficiencies ◮ All future deals need to be assessed on individual merits ◮ Antitrust agencies active in challenging subset of deals that threaten competition ◮ E.g., Sanford-MDC; St. Lukes-Saltzer N. E. Wilson (FTC) Changes in Physician Market Structure
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