Integration of Cardiologists with Hospitals: Effects on Physician Compensation and Productivity

Abstract

Hospital-physician vertical integration has increased considerably over the last decade with cardiologists increasingly being targeted for integration. While consolidation has the potential to produce economies of scale and reduced costs, there is concern that integration may also reduce competition and concentrate bargaining power among providers. Therefore, hospitals may be motivated to offer higher compensation to cardiologists as an incentive to integrate. The objective of this study was to determine if there is a difference in compensation and clinical productivity measured by work relative value units (RVUs) for cardiologists when they are integrated versus independent. The study was a quantitative, retrospective, longitudinal analysis, comparing the compensation and work RVUs of integrated cardiologists to their compensation and work RVUs when they are independent cardiologists. Data from the MedAxiom Annual Survey from 2010 to 2014 were used. MedAxiom is a membership-based organization of cardiology groups and the organizations that employ them and represents more than 7,000 physicians. Participants included 4,830 unique cardiologists that provided 13,642 pooled physician-year observations, with ownership status, compensation, work (RVUs) and other characteristics for analysis. Compensation and clinical productivity measured by work (RVUs) of cardiologists that were integrated with hospitals were compared to the compensation and clinical productivity of when they were independent. Outcomes of interest were compensation and work RVUs. The main independent variable of interest was ownership model (i.e. integrated or independent). Multivariate regression models with physician-level individual fixed-effects to account for time-invariant physician-specific factors were estimated. Average compensation in the pooled sample is $507,064 and average work RVUs is 9,093. Results from the multivariate regressions indicate average physician compensation increases by $129,263.1 (p<0.001) when physicians move from independent to integrated practice. At the same time, physician work RVUs decline by 398.04 (p=0.01). Our findings tentatively support the conjecture that hospitals offer higher pay and lower workloads to incentivize cardiologists to integrate, which in turn can increase market power and market share of their cardiology service lines. This has implications for the price of healthcare services, and should concern policy-makers, researchers, and healthcare executives.