The Impact of Vertical Integration on Physician Behavior and Healthcare Delivery: Evidence from Gastroenterology Practices.

This article examines the impact of vertical integration—defined as hospitals acquiring physician outpatient practices—on care delivery, quality, efficiency, and spending within the U.S. healthcare system, focusing specifically on gastroenterologists treating fee-for-service (FFS) Medicare patients. Using a large national panel dataset of 2.6 million patient visits and a difference-in-differences causal model, the study finds that after integration, physicians reduce the use of deep sedation during colonoscopies, which is associated with a significant increase in postprocedure complications such as bleeding and cardiovascular symptoms. Although integration improves operational efficiency by increasing physician throughput and raises Medicare spending per procedure (largely due to facility fees), it does not improve quality of care. The findings suggest that changes in financial incentives within integrated practices drive these behavioral shifts, and the authors propose that adjusting payment structures—such as increasing reimbursement for deep sedation—could mitigate negative quality outcomes while maintaining efficiency gains.