Dissertation Accumulation, Autonomy, and Expectations Three Essays on the Impact of U.S. Health Care Industry Consolidation Claire E. O’Hanlon This document was submitted as a dissertation in July 2018 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Deborah Freund (Chair), Chapin White, and Stephen Shortell. This work was funded by the Pardee RAND Graduate School James Q. Wilson Dissertation Award and RAND Health. PARDEE RAND GRADUATE SCHOOL For more information on this publication, visit http://www.rand.org/pubs/rgs_dissertations/RGSD415.html Published 2018 by the RAND Corporation, Santa Monica, Calif. R® is a registered trademark Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. 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Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Abstract The U.S. health care industry in the 21st century has been characterized by consolidation. Consolidation, and the resulting increased market concentration, can result in the ability of health care entities to engage in monopolistic pricing behaviors. Consolidation has been found often not to benefit patients and consumers in terms of lower prices, and has mixed effects on health care quality. However, health care consolidation’s impacts on other outcomes, like access to health care and physician satisfaction, are largely unknown, but anecdotal evidence from communities where consolidation has occurred indicate that these impacts exist and are of concern. This dissertation aims to augment the existing evidence base on the consequences of and policy remedies for health care consolidation in three essays. The first essay uses secondary data to provide evidence on the impact of consolidation on physician social networks, the characteristics of which are associated with measurable outcomes such as costs and quality, as well as more distal outcomes like access to information and organizational effectiveness. The stability of shared patient networks increases significantly after acquisition of physician practices by another practice, which has potentially positive implications for organizational effectiveness. However, consistent and notable effects of consolidation on the size and strength of shared patient networks were not observed. The second essay uses case study methods to do a deep dive into a single market (Pittsburgh, Pennsylvania) that has experienced an intense, protracted period of consolidation to understand the breadth of the potential effects of cumulative consolidation events. The observed negative outcomes are largely attributable to three distinct pathways: the loss of physician autonomy when employed by large systems; the accumulation of information, resources, and power by large systems; and the high expectations to which large systems are held. The third essay explores alternative policy solutions for addressing consolidation and its negative consequences. Potentially impactful solutions are increased restrictions on allowable insurance contracting language and alteration of non-profit status requirements. Understanding these impacts of consolidation is critical, not just for policymakers and regulators, but also for health care purchasers, employees, taxpayers, and other stakeholders in communities that are experiencing or anticipating consolidation in their local health care markets so that they can prepare for or mitigate its negative consequences. iii Table of Contents Abstract .......................................................................................................................................... iii Figures........................................................................................................................................... vii Tables ............................................................................................................................................. ix Acknowledgments.......................................................................................................................... xi Abbreviations ............................................................................................................................... xiii 1. U.S. Health Care Industry Consolidation as a Policy Problem ................................................... 1 U.S. Health Care Industry Consolidation Continues ................................................................................ 1 Why is the U.S. Health Care Industry Consolidating? ............................................................................. 1 Why is Health Care Consolidation a Policy Problem? ............................................................................. 3 The Health Care Consolidation Evidence Base is Strong in Some Areas ................................................ 4 The Health Care Consolidation Evidence Base is Weak in Many Areas ................................................. 5 Health Care Consolidation Has Consequences Beyond Price and Remedies Beyond Antitrust .............. 5 Essay 1: Effect of Practice Consolidation on Physician Shared Patient Network Size, Strength, and Stability .......................................................................................................................................... 6 Essay 2: The Impact of Health Care Industry Consolidation in Pittsburgh, Pennsylvania: A Case Study .............................................................................................................................................. 7 Essay 3: U.S. Health Care Industry Consolidation’s Consequences Beyond Price and Remedies Beyond Antitrust: Lessons from Pittsburgh, Pennsylvania ........................................................... 8 Conclusion and Future Research Directions ............................................................................................ 8 References ..................................................................................................................................... 10 2. Effect of Practice Consolidation on Physician Shared Patient Network Size, Strength, and Stability ................................................................................................................................... 12 Abstract .................................................................................................................................................. 12 Introduction ............................................................................................................................................ 13 Methods .................................................................................................................................................. 15 Data .................................................................................................................................................... 15 Econometric Model ............................................................................................................................ 17 Sensitivity Analyses ........................................................................................................................... 17 Results .................................................................................................................................................... 18 Descriptive Characteristics of Consolidation Events ......................................................................... 18 Regression Results ............................................................................................................................. 20 Discussion .............................................................................................................................................. 23 Acknowledgments .................................................................................................................................. 25 Appendix A: Supplemental Network Size and Stability Data ................................................................ 26 References ..................................................................................................................................... 37 3. The Impact of Health Care Industry Consolidation in Pittsburgh, Pennsylvania: A Case Study ................................................................................................................................................. 40 v Abstract .................................................................................................................................................