Hospital, Physician Integration Does Not Improve Care Quality, Patient Satisfaction, Study Says

How much does vertical integration among hospitals and physician provider organizations help improve care quality and patient satisfaction? According to a recently published study, not that much.

How much does vertical integration among hospitals and physician provider organizations help improve care quality and patient satisfaction? According to a recently published study, not that much.

The paper, from Rice University's Baker Institute for Public Policy, examined whether vertical integration between hospitals and physicians, or increases in hospital market concentration, influence patient outcomes. Their theory was that decreased fragmentation, thereby improving care coordination between hospitals and physicians, would improve patient care.

Other studies have found that hospital consolidation and vertical consolidation among hospitals and physician practices have increased prices and costs for patients, and the issue has been getting more attention as the pace of healthcare consolidation continues unabated.

In this study, the authors analyzed 29 quality measures reported to CMS' Hospital Compare database for 2008 to 2015. The quality measures included hospital 30-day readmission rates for heart attack, heart failure, and pneumonia. They also included process of care measurements, which represent the percentage of hospital patients who receive treatments that yield the best results for certain common, serious medical conditions or surgical procedures.

The measures also included patient satisfaction scores as measured through the Hospital Consumer Assessment of Healthcare Providers and Systems surveys, which focus on patient perspectives of care including communication with doctors, nurses, and staff; hospital staff responsiveness; hospital cleanliness and quietness; pain management; and overall rating.

Quality measures have become an integral part of value-based care, which seeks to provide better quality at lower cost. And quality measures are believed by some to be a tool by which hospitals and doctors can attract patients. In addition, patient satisfaction scores are increasingly used in various forms online as patients search for providers.

The quality data were merged with results from the American Hospital Association annual survey to designate 4 healthcare integration levels, from least integrated to most: independent practice associations, open physician—hospital organizations, closed physician–hospital organizations, and fully integrated organizations (FIOs).

To measure hospital market concentration, the commonly used Herfindahl—Hirschman index (HHI) was calculated; the values may range from 1 to 10,000, where a low value indicates low market concentration/high market competition; between 1500 and 2500 is moderately concentrated; and above 2500 is highly concentrated.

The results showed that the percentage of hospitals in the most integrated organizations, FIOs, increased, while the percentage in the other levels of integration fell. The average HHI was also higher in 2015 than in 2008.

The authors found that vertical integration had a limited effect and that regulators should continue to scrutinize proposed hospital mergers, take steps to maintain competition, and reduce barriers to entry.

Quality improved for only a limited set of processes, such as continuation of β-blockers for surgical patients.

Increased market concentration was strongly associated with reduced quality across all 10 patient satisfaction measures at the 95% confidence level (P <.05) and 6 of the 10 patient satisfaction measures remain statistically significant with a Bonferroni corrected P value (P <.005).

The authors called the patient satisfaction scores striking, showing that satisfaction fell as market concentration increased. “With fewer competitors it seems that there is less incentive to keep patients content,” the researchers wrote. “Given the nature of some satisfaction measures, such as explaining medications and communicating well with patients, overall clinical quality could suffer if patients do not properly understand care recommendations during their hospital stay or postdischarge.”

“Physician-hospital integration did not improve the quality of care for the overwhelming majority of these measures,” Vivian Ho, the James A. Baker III Institute Chair in Health Economics and director of the Center for Health and Biosciences, said in a statement. “If patient welfare doesn’t improve after integration, there may be other reasons why physicians and hospitals are forming closer relationships -- perhaps to raise profits.”


Short MN, Ho V. Weighing the effects of vertical integration versus market concentration on hospital quality [published online February 9, 2019]. Med Care Res Rev. doi: 10.1177/1077558719828938.