Abstract: The healthcare sector has become increasingly vertically integrated, with hospital systems launching their own health plans and large insurers acquiring healthcare providers. This paper investigates the causal effect of vertical integration between plans and providers on healthcare utilization in the Medicare Advantage market. Our empirical strategy tackles two key sources of selection: enrollee selection into vertically integrated plans and hospital selection into vertically integrated entities. To address enrollee selection, we employ a differential distance instrument that exploits variation in proximity to vertically integrated hospitals. To account for hospital selection, we develop a novel instrument based on the share of Medicare–Medicaid dual-eligible beneficiaries.
(with Ira Abraham, Boston College)