The Impact of Organizational Boundaries on Healthcare Coordination and Utilization
Patients often receive healthcare from providers spread across different firms. Transaction costs, imperfect information, and other frictions can make it difficult to coordinate production across firm boundaries, but we do not know how these challenges affect healthcare. We define and measure organizational concentration: the distribution across organizations of a patient's healthcare. Medicare claims show that organizational concentration varies substantially across physicians and regions, and that patients who move to more concentrated regions have lower healthcare utilization. Further, we show that when primary care physicians (PCPs) with higher organizational concentration exit the local market, their patients switch to more typical PCPs with lower organizational concentration and then have higher healthcare utilization. Patients who switch to a PCP with 1 SD higher organizational concentration have 10% lower healthcare utilization. This finding is robust to controlling for the spread of patient care across providers. Increases in organizational concentration have no detectable effect on emergency department utilization or hospitalization rates, but do predict improvements in diabetes care.
The authors gratefully acknowledge research support by NIH grant P30AG012810. We thank Mohan Ramanujan, Len McCain and Elizabeth Adams for their assistance obtaining and managing the data. We thank Jason Abaluck, Amitabh Chandra, Kimberley Geissler, Thomas Koch, Jennifer Kwok, James Rebitzer, Adam Sacarny, Jonathan Skinner, Jessica Van Parys, and Annetta Zhou for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.