Authors:

Abstract

Objectives

We empirically examine market concentration measures of medical groups in each of California's counties. Market shares are based on enrollment rather than number of physicians, thereby minimizing double counting problems. We then estimate statistical models to determine the extent to which medical group market structure affect medical group prices.

Methodology

We calculate and compare concentration ratios for health plans and medical groups in all California counties, based on enrollment data from Cattaneo and Stroud, Inc. To assess the role of market structure on physician prices we estimate a price function.

Findings

This study has three primary findings. First, more than 83 percent of the California counties, which have medical group enrollment, exhibit medical group HHI concentration ratios in excess of 1,800, and 59 percent of the counties have medical group HHI concentration ratios of 3,000 or more. Second, in terms of antitrust safety zones, taking the MSA to be the relevant geographic market, only 4 medical groups lie outside of the 20 percent exclusive network safety zone, and no medical groups lie outside of the 30 percent non-exclusive network safety zone; taking the county as the relevant geographic market, the number of medical groups operating outside of the safety zones increases markedly: 12.8 percent comprised at least 20 percent of their markets and 7.9 percent comprised at least 30 percent of their markets. Third, there is a negative association between medical group concentration and Medicare price.

Conclusions

Medical group consolidation has led to a number of highly concentrated physician markets in California, with several medical groups falling outside of antitrust safety zones. The results of the multivariate models should be interpreted with caution, but the results are interesting enough to suggest that additional analyses should be done using better measures of price.

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