The Relationship Between Physician Organization and Health Care Use in Traditional Medicare and Medicare Advantage

Publicly funded insurance programs increasingly rely on private health plans to manage care, and physicians have organized into larger groups, many of which are owned by hospitals or health care systems. We examine the relationship between physician organization and health care resource use and whether this relationship differs between traditional Medicare and Medicare Advantage. We find that physician group practice is associated with less use of hospital inpatient and outpatient services, but that this relationship is attenuated for patients enrolled in Medicare Advantage. We also find that hospital ownership of physician practices is associated with greater use of hospital outpatient services, and that this relationship is not attenuated by Medicare Advantage. We conclude that, while Medicare Advantage and physician groups can serve as substitutes in care management, Medicare Advantage has had less success in controlling the shift toward hospital outpatient utilization. We also discuss the implications for health care market structure research.