2.3.1
Event Study of Switches
I estimate the costs of switching PCPs in each of the 306 Hospital Referral Region (HRR) markets. My empirical strategy uses samples of patients who involuntarily switch PCPs. I classify a switch as involuntary if the patient’s main PCP leaves the state or leaves Medicare (e.g., due to retirement) within one year before or after the main PCP switch.
4I include year-by-quarter fixed effects in my estimations, which accounts for inflation and other increases
in the prices of healthcare.
5In some cases Medicare is the primary payer and there is a secondary payer (e.g., Medigap supplemental
insurance), but I do not observe the payments made by the secondary payer versus the patient or the identity of the secondary payer.
I return to the model from Section 1.4.1, where my parameters of interest are now the event time coefficients θg,k, which capture temporary utilization effects around the time of a PCP switch. In contrast to Equation 1.1, I define γej(i,t) as the PCP fixed effects that
correspond to baseline main PCPs and allow them to be different from those that correspond to the main PCPs as defined in Section 1.4.1. The event study model with two-way fixed effects is yit = αi+eγj(i,t)+ xitβ + X g X k θg,kDg,kit + εit, (2.1)
where αi are patient fixed effects, eγj(i,t) are baseline PCP fixed effects, xit are controls as discussed in Section 1.4.1.
My goal is to estimate the excess utilization incurred due to involuntary PCP switches relative to the baseline of the same patients having the same main PCPs. One empirical challenge is to accurately define the baseline PCP. The main PCP assignment is retrospective, so I allow the baseline main PCP fixed effect to be a weighted average between the origin PCP and the destination PCP based on the timing within the switch period. Specifically, I define e γj(i,t) = (1−k 4 γj(i,t),origin+ 3+k 4 γj(i,t),destination if k ∈ [−2, 0] γj(i,t) otherwise. (2.2) This specification assumes a simple linear decline in influence between the origin PCP and the destination PCP.6,7
As in Section 1.4.1, I include indicators Dg,kit for whether patient has a specific type of switch g that is k ∈ [−8, 12] quarters relative to the event time k = 0, the last quarter a patient is assigned a main PCP. I define the leads to be whether the patient switches away from their current main PCP and the lags to be whether the patient switched to their current main PCP.8
In my specification, I include six types of switches g: (a1) involuntary switch between two main PCPs in the same physician practice group, (a2) voluntary switch between two main PCPs in the same physician practice group, (b1) involuntary switch between two main PCPs in different physician practice groups, (b2) voluntary switch between two main PCPs
6The linear decline roughly matches the patterns in Figures 1.1 and 1.2. In ongoing work, I am examining
alternative main PCP weightings, including the simpler assignment rule in which the patient is assigned the main PCP (i.e., such that all of the weight would be with the origin PCP and no weight would be on the destination PCP in Equation 2.2), as well as the assignment rule in which the patient is assigned to the destination PCP as the other extreme for robustness. I am also estimating the switching costs in a specification that substitutes the long-run PCP fixed effects estimated using the specification from Section 1.5 and Equation 1.2 for eγj(i,t), such that only the patient fixed effects and the coefficients on event time
indicators and controls are estimated in Equation 2.1.
7In my estimation, I duplicate the observations with two different baseline main PCPs, assign each of the
two observations to either the origin PCP or the destination PCP, and weight the observations according to Equation 2.2.
8In an alternative specification, I could include separate indicators for additional switches (e.g., leads for
whether a patient switches away from their next main PCP, lags for whether a patient switched to their previous main PCP), but relatively few patients make these additional switches and any effects of these additional switches would be less precisely estimated.
in different physician practice groups, (c) from no main PCP to a main PCP, and (d) from a main PCP to no main PCP.
For types of switches between two main PCPs (i.e., types (a1), (a2), (b1), and (b2)), I further estimate a separate set of coefficients that correspond to patients who have a balanced panel of indicators over k ∈ [−6, 8] – i.e., they are assigned to their origin PCPs for k ∈ [−6, 0] and to their destination PCPs for k ∈ [1, 8].9 I use the estimated coefficients on
the balanced panel indicators in my switching cost estimations.
In standard event study designs, the main identifying assumption would be that utiliza- tion does not change with other factors at the timing of the event (Jacobson, LaLonde, and Sullivan 1993; McCrary 2007). An empirical challenge in my setting is that PCP switch timing is defined based on patient PCP visits, so the coefficients θg,k are mechanically cor- related with utilization and not directly interpretable. There are also potential pre-trends as patients prepare to switch PCPs or as PCPs prepare to retire or relocate. My empirical strategy relies on the fact that among the patients with involuntary switches, the timing of the PCP departures is exogenous, and involuntary switches occur for all of the departing PCPs’ patients. Only the exact timing of how PCP switches are defined is mechanically correlated with non-switch related utilization patterns.
2.3.2
Switching Costs Estimation
To estimate the net switching costs, I take the sum over the utilization deviations from baseline in terms of dollar spending using the coefficients θg,k estimated on the balanced panels. My main identifying assumption is that the sum of patient utilization over a range of quarters around the PCP switch is not systematically different for patients who involuntarily switch PCPs for reasons other than the PCP switch events.
I define the switching costs ˆSa,bg for the balanced panels of patients with switch type g as the sum of the corresponding coefficients scaled to levels of dollar spending over the quarters k ∈ [a, b] for a representative patient with switch type g. Specifically, I define the switching costs as ˆ Sa,bg = b X k=a h exp ˆθg,k+ yga− exp (yg a) i (2.3)
where yga is the mean log utilization of the patient-quarters in pre-event time a with switch type g that scales the estimated coefficients ˆθg,k to dollar spending.10
9Specifically, I generate separate sets of indicators for the balanced panel. Dg,k
it consists of 186 indicators.
For the balanced panel, each of the four types of switches between PCPs has indicators for 15 event time quarters k ∈ [−6, 8]. For the patient-quarters not in the balanced panel, each of the four types of switches between PCPs has indicators for 21 event time quarters k ∈ [−8, 12]. Each of the two types of switches from a PCP to no PCP has indicators for 9 event time quarters k ∈ [−8, 0]. Each of the two types of switches from no PCP to a PCP has indicators for 12 event time quarters k ∈ [1, 12].
10In an alternative specification, I could allow the pre-event time to differ from the first quar-
ter in which switching costs are calculated, such that the switching costs would be Sˆa,b,cg = Pb k=a h exp ˆθg,k+ yg c − exp (yg c) i
, where ygc is the mean log utilization of the patient-quarters in pre-event
I estimate Equation 2.1 with a = −6 and b = 8 within each market with robust standard errors three-way clustered by patient, by main PCP, and by quarter. For each market, I then compute the switching costs ˆSa,bg in Equation 2.3 and the standard errors using the delta method allowing for correlation across the estimated coefficients ˆθg,k (across both g
and k) among the balanced panels within each market.11 The estimated switching costs
include effects on utilization from six quarters before to eight quarters after the switch and are scaled by the mean utilization for switch group g at six quarters before the switch.
2.3.3
Estimation Outcome Measures and Samples
My main outcome measures are contemporaneous quarterly log utilization.12 I also use this outcome measure in my practice styles analysis in Chapter 1 and present the results in Appendix C.2.
For my estimation sample, I use the “connected set” sample of PCPs and patients that I define in Section 1.5.1. The PCP fixed effects and patient fixed effects are identified within this connected set. I do not omit the patient-quarter observations that correspond to the switch period. For the balanced panels, I allow for the pre-switch and post-switch main PCPs combined to meet the requirement that patients visit their main PCPs for at least 75% of their PCP visits over the past year.13 Column (3) of Table 1.4 reports the summary
statistics.14