Description:

Speaker: Hyein Cho

Title: "Vertical Integration between Healthcare Providers and Insurers: Care Coordination vs. Patient Steering"

Abstract: Fragmented care—care delivered by many providers—is often criticized as an important source of inefficiency in the U.S. healthcare system. This paper provides empirical evidence that vertical integration between healthcare providers and insurers reduces care fragmentation. Using a mover's design in the Massachusetts individual market, where three out of nine insurers are vertically integrated, I find that vertical integration reduces care fragmentation by one standard deviation, which is mainly driven by enrollees seeing fewer specialists. On the other hand, vertically integrated plans have narrower networks disproportionately representing their integrated providers, suggesting patient steering through network design. To analyze whether the reduction in care fragmentation comes from better-coordinated care among integrated physicians or patient steering, I build a physician referral model. My estimates suggest that primary care practitioners observe a more accurate signal about the match value between the patient and the specialist for specialists that they are integrated with. Widening the network size of vertically integrated plans would increase out-of-provider group referrals and reduce patients' travel time.