Episode payment models and provider consolidation

Abstract

A possible unintended consequence of episode payment models is provider consolidation, which can, in turn, increase prices for commercially insured enrollees. We assess the effect of Medicare's Comprehensive Care for Joint Replacement (CJR) model on provider consolidation. Hospitals in randomly assigned metropolitan statistical areas were mandated to participate during the first 2 years of the model and a subset of hospitals were mandated for later years. We used a difference-in-differences approach to assess whether CJR affected consolidation, as measured by hospital ownership of practices, the number and size of practices, the Herfindahl-Hirschman Index, and the four-firm concentration ratio. Given limited sample sizes, our results are only suggestive that CJR was not associated with changes in consolidation. Our strongest results suggest null effects for changes in hospital ownership and practice size. These findings suggest that concerns regarding the role alternative payment models play in consolidation may have been overstated.