Does Multispecialty Practice Enhance Physician Market Power?

In health care, vertical integration-common ownership of producers of complementary services-may have both pro- and anticompetitive effects. We use data on 40 million commercially insured individuals from the Health Care Cost Institute to construct price indices for office visits to general practice and specialist physicians for the years 2008-12. Controlling for generalist market concentration, we find that generalists charge higher prices when they are integrated with specialists, and that the effect of integration is larger in more concentrated specialist markets. Conversely, controlling for specialist market concentration, specialists charge higher prices when integrated with generalists, with larger effects in more concentrated generalist markets. Our results suggest that multispecialty practice enhances physician market power.