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ESSAYSONORGANIZATIONALFORMSINTHEHEALTHCAREINDUSTRY
ADISSERTATION
SUBMITTEDTOTHEDEPARTMENTOFECONOMICS
ANDTHECOMMITTEEONGRADUATESTUDIES
OFSTANFORDUNIVERSITY
INPARTIALFULFILLMENTOFTHEREQUIREMENTS
FORTHEDEGREEOF
DOCTOROFPHILOSOPHY
KristinMadison
August2001
CopyrightbyKristinMadison2001
AllRightsReserved
IcertifythatIhavereadthisdissertationandthat,inmyopinion,itisfullyadequatein
scopeandqualityasadissertationforthedegreeofDoctorofPhilosophy.
MarkMcClellan,PrincipalAdviser
IcertifythatIhavereadthisdissertationandthat,inmyopinion,itisfullyadequatein
scopeandqualityasadissertationforthedegreeofDoctorofPhilosophy.
DanielP.Kessler
IcertifythatIhavereadthisdissertationandthat,inmyopinion,itisfullyadequatein
scopeandqualityasadissertationforthedegreeofDoctorofPhilosophy.
JohnH.Pencavel
ApprovedfortheUniversityCommitteeonGraduateStudies:
in
ABSTRACT
Oneofthemostvisiblerecentchangesintheorganizationofhealthcareproviders
hasbeenanincreaseinhospitalintegration,bothhorizontalandvertical.Understanding
theeffectsofhospitalaffiliationsisanimportantprerequisitetodevelopingmore
effectivehealthcaredeliveryandreimbursementsystems. Thisdissertationstudiesthe
natureandeffectsoftwotypesofprovideralliances:multihospitalsystemsandhospital-
physicianaffiliations.
Chapter1focusesonmultihospitalsystems'effectsonpatients. Inadditionto
allowinghospitalstotakeadvantageofadministrativeeconomiesofscale,system
membershipmayfacilitateaccesstocapitalandthecoordinationofpatientcare,
ultimatelyaffectingpatienttreatment. Combininginformationonmultihospitalsystem
membershipwithMedicaredataonheartattackpatientsbetween1985and1998,Chapter
1usesaregressionmodelincorporatinghospitalfixedeffectstomeasuretheimpactof
multihospitalsystemmembershiponheartattackpatienttreatments,treatment
expenditures,andoutcomes. Theresultssuggestthatformid-sizedandlargehospitalsin
the1990s,systemstatustendstobeassociatedwithhigher-intensitytreatments,lower
expenditures,andfewdifferencesinmortality. Furtheranalysesassesstheextentto
whichserviceofferingsandprocedurevolumesvarybysystemtype.
Theremainderofthedissertationexamineshospital-physicianaffiliations.
Hospital-physicianentitiessuchasphysicianhospitalorganizationscouldconceivably
serveasthefoundationforanewtypeofdeliverysystem,capableofimprovingthe
qualityandefficiencyofcare. Chapter2examinesthecharacteristicscontributingtothe
growthandevolutionofhospital-physicianaffiliationsduringthe1990s. Chapter3then
testswhetherhospital-physicianaffiliationshavehadanimpactonpatients.Ifthesenew
typesoforganizationarelittlemorethancontractingvehiclesorattemptstogainmarket
power,theywillshowlittleeffectonpatienttreatment. Iftheyfacilitateinformation
developmentorrealignincentives,however,theycouldfundamentallychangethenature
ofpatientcare.Regressionresultsindicatethatinthemid-1990s,hospital-physician
affiliationsweresometimesassociatedwithmoreintensivetreatments,butthatingeneral
theyhavehadlittleeffectonthetreatment,treatmentexpenditures,orhealthoutcomesof
heartattackpatients.
IV
ACKNOWLEDGMENTS
IwouldliketothankJasonBrown,KateBundorf,JefFGeppert,DanKessler,Al
Klevorick,JulieLee,MarkMcClellan,JohnPencavel,AbigailTay,EdVytlacil,and
AkilaWeerapanafortheirencouragement,suggestions,assistanceinobtainingdata,and
manyhelpfuldiscussions. Ihavealsobenefitedfromtheinsightsofparticipantsofthe
10thAnnualHealthEconomicsConference,theStanfordPublicEconomicsLunch,the
StanfordEconomicApplicationsSeminar,andaseminarattheUniversityofMinnesota
SchoolofPublicHealth. Inaddition,thisdissertationwouldhavebeenimpossibleto
completewithoutaccesstotheresourcesoftheNationalBureauofEconomicResearch,
andtheeffortsofmultipleNBERemployeeswhoassembledandprocessedmuchofthe
datausedintheanalyses.
IgratefullyacknowledgeGraduateFellowshipsupportfromtheNationalScience
Foundation,aswellasadissertationfellowshipgrantfromtheHealthCareFinancing
Administration. IalsothanktheJohnM.OlinPrograminLawandEconomicsatthe
StanfordLawSchoolfora2001AcademicYearResearchFellowship.
Anyopinions,findings,conclusionsorrecommendationsexpressedinthis
documentarethoseoftheauthoranddonotnecessarilyreflecttheviewsoftheNational
ScienceFoundationortheHealthCareFinancingAdministration.
TABLEOFCONTENTS
ListofTables ix
ListofIllustrations xii
Abbreviations xiii
CHAPTER1 TheRelationshipBetweenMultihospitalSystemMembership
andTreatments,Expenditures,andOutcomesforMedicarePatients
withAcuteMyocardialInfarction
1 Introduction 1
1.1 HowMightSystemMembershipAffecttheTreatmentofPatients? 3
1.1.1 ChangesinInformation 3
1.1.2 ServiceConsolidation 6
1.1.3 ServiceProliferation 8
1.1.4 Summary:PotentialEffectsofSystemMembershipon
PatientCare 11
1.2 DataandtheChoiceandConstructionofVariables 11
1.2.1 HospitalCharacteristics 11
1.2.2 MultihospitalSystemMembership 13
1.2.3 PatientData 22
1.2.4 DependentVariables 23
1.3 DoesMultihospitalSystemMembershipAffecttheTreatmentof
Patients? 28
1.4 DoesSystemMembershipAffecttheProvisionofCardiacServices?.38
1.5 DoesSystemMembershipAffecttheChoiceofTreatmentFacility?..41
1.6 MethodologicalChallenges:Endogeneity 48
1.7 Conclusions 52
Chapter1Appendixes 56
VI
CHAPTER2 Hospital-PhysicianAffiliations:Development&Evolution
2 Introduction 61
2.1 OverviewofHospital-PhysicianAffiliations 63
2.1.1 Hospital-PhysicianAffiliationTypes 63
2.1.2 LiteratureReview 67
2.1.3 TheoriesofHospital-PhysicianAffiliation
Development&Evolution 73
2.2 Data 76
2.3 CharacteristicsofHospitalswithHospital-PhysicianAffiliations 83
2.3.1 Analyses&Results 83
2.3.2 Discussion 89
2.4 PatternsofHospital-PhysicianAffiliationAdoption 92
2.5 PatternsofHospital-PhysicianAffiliationEvolution 100
2.5.1 Hospital-PhysicianAffiliationTransitions 101
2.5.2 NumberofHospital-PhysicianAffiliations 103
2.6 Conclusions 107
Chapter2Appendixes 110
CHAPTER3 TheRelationshipBetweenHospital-PhysicianAffiliations
andTreatments,Expenditures,andOutcomesforMedicarePatients
withAcuteMyocardialInfarction
3 Introduction 120
3.1 LiteratureReview 121
3.2 Data 127
3.3 Hospital-PhysicianAffiliations&PatientTreatment 129
3.3.1 PatientTreatments,Expenditures&Outcomes 129
3.3.2 Identification&EndogeneityIssues 132
Vll
3.3.3 Inpatient,Outpatient&PhysicianTreatmentExpenditures...141
3.4 VariationsinAffiliations'EffectsbyHospitalorMarketType 144
3.5 Conclusions 147
Chapter3Appendixes 150
References 155
Vlll
LISTOFTABLES
CHAPTER1
1.1 HypothesesAboutImpactsofSystemMembership 11
1.2 HospitalCharacteristicsinSelectedStudyYears 13
1.3 IndependentandSystemHospitalCharacteristicsinSelectedStudyYears 17
1.4 PercentageofHospitalsofEachSystemType,byHospitalSizeCategory 20
1.5 MeansofDependentVariablesbyInitialAdmissionHospitalBedSize
andSystemType 28
1.6 TheEffectofSystemMembershiponAMIPatientTreatments,Payments,
andOutcomes,1985-98 31
1.7 BasicOLSRegressionResults:TheEffectofSystemMembershiponAMI
PatientTreatments,Payments,andOutcomes,1985-98 33
1.8 OLSRegressionResults:TheEffectofSystemMembershiponAMIPatient
Treatments,Payments,andMortalityinEarly(1985-91)andLate(1992-98)
Periods 35
1.9 PercentageofHospitalsOfferingCardiacServices,bySize,SystemStatus,
andYear 39
1.10 OLSRegressionofCardiacServiceOfferingsonSystemStatusinEarly
(1985-91)andLate(1992-98)Periods 40
1.11 OLSRegressionofPTCAPatientTreatmentHospitalVolumeandPTCA
PatientOutcomesonSystemStatusinEarly(1985-91)andLate(1992-98)
Periods 45
CHAPTER1APPENDIXES
LA RegressionResults:EffectsofMultihospitalSystemMembershipon
Patients 56
1.B DoSystemAffiliationsAffectPatientTransferDestinations? 58
1.C.l DoesNonrandomHospitalSelectionIntoSystemsAffectRegression
Results? 59
1.C.2 DoesNonrandomHospitalSelectionIntoSystemsAffectRegression
Results? ForComparison:BasicOLSRegressionResultsfor
1985-1995Only 60
IX
CHAPTER2
2.1 PercentageofStudyHospitalsInvolvedinHospital-PhysicianAffiliations....62
2.2 CharacteristicsofStudyHospitalsbyHPAType,1994 82
2.3 Hospital&MarketCharacteristicsAssociatedwithHospitalParticipation
inAny,Low-Integration,andHigh-IntegrationHospital-Physician
Affiliations,1994-98 84
2.4 UrbanHospitalParticipationinHospital-PhysicianAffiliations,1994-1998
ProbitAnalysiswithMSAFixedEffects:MarginalEffects 87
2.5 HazardModel:HospitalAdoptionofHospital-PhysicianAffiliations
HazardRatios 94
2.6 HospitalAdoptionofHospital-PhysicianAffiliations:HazardRatios 98
2.7 OrderofAdoptionofLow-vs.High-IntegrationHospital-Physician
Affiliations,1994-1998 101
2.8 HazardAnalysis:EffectofPreviousHPAAdoptiononHigh-Integration
HPAAdoption,1995-1998 102
2.9 OLSRegression:EffectofHospitalsandMarketCharacteristicsonNumber
ofHospital-PhysicianAffiliationTypesinWhichaHospitalParticipates
UrbanHospitals:1994-1998 106
CHAPTER2APPENDIXES
2.A.1 CharacteristicsofStudyHospitalsin1994and1998 110
2.B.1 ProbitAnalysisResults:MarginalEffects
Hospital&MarketCharacteristicsAssociatedwithHospital
ParticipationinAny,Low-Integration,andHigh-IntegrationHospital-
PhysicianAffiliations,1994-1998 112
2.B.2 OLS AnalysiswithHospitalFixedEffects
Hospital&MarketCharacteristicsAssociatedwithHospital
ParticipationinAny,Low-Integration,andHigh-IntegrationHospital-
PhysicianAffiliations,1994-1998 113
2.B.3 UrbanHospitalParticipationinHospital-PhysicianAffiliations,
1994-1998:ProbitAnalysiswithMSAFixedEffects
MarginalEffects 114
2.C.1 HazardModel:HospitalAdoptionofHospital-PhysicianAffiliations
HazardRatios 116
