Description:

Speaker: Hyein Cho

Title: Vertical Integration between Healthcare Providers and Insurers: Care fragmentation vs. Steering

Fragmented care—lack of coordination across different healthcare providers—is often criticized as an important source of inefficiency in the U.S. health care system. This paper provides empirical evidence that vertical integration between healthcare providers and insurers reduces care fragmentation, mainly through the reduction of the number of distinct specialists visited. I find suggestive evidence that the reduction of distinct specialist visits does not come from the change in insurer-provider payment method, but rather from lower coordination costs and narrower network. However, the reduction of fragmented care comes at a cost: vertical integration increases steering patients to their integrated health system, which may limit access. To quantify the magnitude of each mechanism through which care fragmentation is reduced and evaluate welfare effects of this trade-off, I develop and estimate a structural model.