Ancillary Cost Implications of Multisiting and Organizational Boundary Spanning during Healthcare

Abstract

This study investigates the management of diagnostic testing and pharmacy expenditures in U.S. acute-care hospitals. These so-called ancillary costs are charges associated with services provided to support patient treatment, including laboratory, radiology, and pharmacy charges. Previous studies suggest that investing in structural and technological boundary-spanning practices may help reduce the increasing ancillary costs. In this research, we examine the role of individual boundary spanners, namely multisiting physicians who practice at more than one hospital, in reducing ancillary cost. We also look at how organizational boundary spanning abilities measured by the hospital’s affiliation in an accountable care organization (ACO) model affect this relationship. To do this, we assembled a unique data set of 163,617 patients treated by 4,411 physicians at 182 hospitals in Florida from 2014 to 2016. Using an econometric estimation approach accounting for endogeneity, we find that patients treated by multisiting physicians experienced per-hospitalization reductions in laboratory and radiology charges of 49.16% and 32.04%, respectively. These savings increase, moreover, when multisiting physicians have less practice experience. We also find that hospitals participating in ACO model complements the savings achieved through multisiting physicians in the form of even lower pharmacy costs. In our post-hoc analysis, we find the cost reduction that multisiting physicians achieve come through reducing the total number of procedures or tests ordered. We also find that lower treatment charges do not compromise the clinical quality of patients treated by multisiting physicians. Collectively, the findings offer important insights to the healthcare operations management literature on the interaction between individual-organizational boundary-spanning efforts and patient-level outcomes.