Health System Expansion and Changes in Medicare Beneficiary Utilization of Safety Net Providers

Background: Evidence is limited on insured patients’ use of safety net providers as vertically integrated health systems spread throughout the United States. Objectives: To examine whether market-level health system penetration is associated with: (1) switches in Medicare beneficiaries’ usual source of primary care from federally qualified health centers (FQHCs) to health systems; and (2) FQHCs’ overall Medicare patient and visit volume. Research Design: Beneficiary-level discrete-time survival analysis and market-level linear regression analysis using Medicare fee-for-service claims data from 2013 to 2018. Subjects: A total of 659,652 Medicare fee-for-service beneficiaries aged 65 and older lived in one of 27,386 empirically derived primary care markets whose usual source of care in 2013 was an FQHC or a non-FQHC–independent physician organization that predominantly served low-income patients. Measures: Beneficiary-year measure of the probability of switching to health system-affiliated physician organizations and market-year measures of the number of FQHC visits by Medicare beneficiaries, number of beneficiaries attributed to FQHCs, and FQHC Medicare market shares. Results: During 2013–2018, 16.5% of beneficiaries who sought care from FQHCs switched to health systems. When health system penetration increases from the 25th to 75th percentile, the probability of Medicare FQHC patient switching increases by 4.6 percentage points, with 22 fewer Medicare FQHC visits and 4 fewer beneficiaries attributed to FQHCs per market year. Complex patients and patients who sought care from non-FQHC, independent physician organizations exhibited higher rates of switching to health systems. Conclusions: Health system expansion was associated with the loss of Medicare patients by FQHCs, suggesting potential negative spillovers of vertical integration on independent safety net providers.