Patient Admission Patterns and Acquisitions of “Feeder” Hospitals

Abstract

Acquiring outlying community hospitals is one approach commonly used by large tertiary care hospitals to increase referrals. Sophisticated acquirers may also seek to selectively increase referrals of more profitable patients. To explore these issues, we study vertical hospital acquisitions. Using a treatment and control framework, we find that roughly 30% of vertical acquisitions lead to a significant increase in referrals. Very few result in decreases. We find that increases are concentrated among patients undergoing more profitable procedures and with more generous insurance. However, we find no evidence that hospitals shun patients with higher expected costs of care.

Hospital Mergers and Referrals in the United States: Patient Steering or Integrated Delivery of Care?

“…While caution should be exercised so as not to punish rural, nonspecialized hospitals for not having high-quality specialized hospitals nearby, monitoring changes in hospital quality measured in this way over time could prevent undesirable distortions in referral practice. 1 These terminologies follow Huckman (2006) and Nakamura, Capps, and Dranove (2007). 2 This paper studies referrals for procedures that the referrer cannot perform.…”

“…7 Referrals might increase if both the target and the acquirer have increased numbers of managed care contracts. Nevertheless, Nakamura, Capps, and Dranove (2007) found increases in referrals for Medicare indemnity patients, thereby suggesting that there are other reasons for the increase. 8 Anti-Kickback Law (42 U.S.C.…”

“…In the 1990s, the integration of tertiary and non-tertiary care hospitals increased (Huckman 2006;Nakamura, Capps, and Dranove 2007), as did mergers between hospitals and physician practice groups (Ciliberto 2006;Cuellar and Gertler 2005). In the health economics literature, these types of mergers are referred to as vertical integrations (Ciliberto 2006;Ciliberto and Dranove 2005;Cuellar and Gertler 2005;Gal-Or 1999;Gaynor 2005;Huckman 2006;Nakamura, Capps, and Dranove 2007), and similar motives are hypothesized for both.…”

“…In the health economics literature, these types of mergers are referred to as vertical integrations (Ciliberto 2006;Ciliberto and Dranove 2005;Cuellar and Gertler 2005;Gal-Or 1999;Gaynor 2005;Huckman 2006;Nakamura, Capps, and Dranove 2007), and similar motives are hypothesized for both. Thus, I review previous literature on hospital-physician integration as well as on hospital mergers.…”

Vertical integration and optimal reimbursement policy

“…Using data from Florida and New York from 1994–2002, Nakamura et al (2007) find that large tertiary care hospitals that acquire community hospitals increase their referrals, particularly among patients undergoing more profitable procedures and with more generous insurance. However, although this work is informative, it can neither reject conventional transaction-cost explanations for integration nor provide guidance to purchasers and policy-makers about their optimal response to providers’ decisions about organizational form.…”