Vertical Integration and Hospital Performance:Evaluating Physician Employment in Hospitals

A dramatic change in the hospital industry is the increasing emphasis on linking provider payment to quality performance metrics. This is one of several considerations leading hospitals to vertically integrate by employing physicians. Yet, there is little evidence regarding whether this form of vertical integration leads to better operational performance. Using data from 217 California hospitals that experienced a total of 417,046 eligible opportunities to conform to external performance metrics (conformance quality) for treating patients in the cardiology operating unit, we empirically evaluated the relationship between physician employment and conformance quality. We also evaluated whether certain operational conditions (health IT adoption, operational focus, and operating experience) complement or substitute for physician employment. Findings suggest that physician employment is not only positively associated with conformance quality but also associated with more consistent conformance quality. Moreove...