The first chapter of this dissertation replicates, re-specifies, and re-estimates Cardon and Hendel's 2001 RAND Journal of Economics article "Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey." This article presented the first structural model to study adverse selection in the health insurance market—finding no evidence of informational asymmetries. I demonstrate, however, that after normalizing residual income, correcting an inconsistency in the construction of a health good, and accounting for corner solutions of the maximization problem, asymmetric information in fact exists in the health insurance market studied.
The second chapter examines whether hospitals strategically choose to vertically integrate with physicians in order to capture facility fees. To address this question, I match data on hospitals' ownership of clinical oncologist practices with Medicare payment data disaggregated to the physician and specific service level. I leverage a 2014 policy change that drastically altered the payment structure of Medicare's facility fees paid to hospitals for evaluation and management services—and yet, it did not alter the direct payments made to physicians. Contrary to popular belief, I find no evidence that the financial incentives of facility fees have an effect on the probability that a hospital and clinical oncologist vertically integrate.
The third chapter explores how hospital-physician integration in the United States has the potential to restrict patient referral pattern flows within specific referral networks. I first empirically illustrate these referral network restrictions that result from hospital-physician integration and then consider their implications for newly integrating oncologists as well as for independent oncologists. Utilizing detailed longitudinal data that cover the complete U.S. shared patient patterns for oncologists' Medicare beneficiaries along with oncologists' integration status with hospitals in geographically-defined market boundaries, I find that the average integrating oncologist increases his or her share of referrals made to health system partners by 36 percentage points following integration; these effects are most pronounced in markets with highly concentrated levels of integrated oncologists employed by a single health system. In addition, hospital-physician integration increases the probability of referral foreclosure—with respect to the referrals made to oncologists outside of a health system—by 14 percentage points in unconcentrated markets and by 23 percentage points in highly concentrated markets. As a single health system increases its market share of integrated oncologists, independent oncologists in the market shift their referrals to oncologists of lower quality. These findings suggest broader access issues for patients of independent oncologists in markets that experience high levels of consolidation that result from hospital-physician integration.
