Organizational boundaries of medical practice: the case of physician ownership of ancillary services

Abstract

Physician ownership of in-office ancillary services (IOASs) has come under increasing scrutiny. Advocates of argue that IOASs allow physicians to supervise the quality and coordination of care. Critics have argued that IOASs create financial incentives for physicians to increase ancillary service volume. In this paper we develop a conceptual framework to evaluate the tradeoffs associated with physician ownership of IOASs. There is some evidence supporting the existence of scope and transaction economies in IOASs. Improvement in flow and continuity of care are likely to generate scope economies and improvements in quality monitoring and reductions in consumer transaction costs are likely to generate transaction economies. Other factors include the capture of upstream and downstream profits, but these incentives are likely to be small compared to scope and transaction economies. Policy debates on the merits of IOASs should include an explicit assessment of these tradeoffs. This research was supported in part by funding from the American Association of Orthopaedic Surgeons (AAOS).

Musculoskeletal disorders and associated healthcare costs among family members of injured workers

“…Thus, we reduced our estimate by 15.5% ‐17.2%. We used the weights provided by Truven in the CCE database [see Schneider et al, for the details] to make the results somewhat more representative of the national insured population of workers their families. We expressed costs in 2013 dollars using a weighted average of indexes for physician services and paramedical services from the National Income and Product Accounts [U.S. Department of Commerce, ].…”

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“…; Levin and Rao ; Schneider et al. ). If the radiologist is also an owner of the facility, s/he has additional incentives to encourage repeat scans, but these likely reflect the ownership stake, not the FFS payment…”

“…If the ordering physician has an ownership stake in the imaging facility, however, a financial conflict of interest arises from the profit associated with increased facility use (Hillman et al 1990;Levin and Rao 2011;Schneider et al 2012). If the radiologist is also an owner of the facility, s/he has additional incentives to encourage repeat scans, but these likely reflect the ownership stake, not the FFS payment.…”

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“…Private equity firms may also value that orthopaedic practices can attract additional patients through in-house ancillary services, such as imaging, ambulatory surgical centers, physical therapy, physiatry, durable medical equipment, pain management, and integrated wellness programs, although state and federal laws may limit the scope of these services. 15…”