EXPLORING THE RELATIONSHIP BETWEEN INPATIENT FACILITY AND PHYSICIAN SERVICES

OBJECTIVES. Medicare hospitalizations involve both facility and physic ian services. Although several studies analyze hospital-level variatio ns in Medicare inpatient facility end inpatient physician services per admission, few studies directly explore the relationship between thes e services. Theoretically, inpatient facility and physician services m ay be complements or substitutes. That is, an increase in facility ser vices may lead to an increase or decrease in physician services and vi ce versa. This article contributes to the existing literature by explo ring directly the relationship between facility and physician services . METHODS. Medicare physician claims were linked to inpatient hospital stays using data from Medicare hospital cost reports, the Medicare Pa tient Analysis and Review file, and the Medicare National Claims Histo ry System. RESULTS. In multi-variate regression analyses, the (partial ) correlations between facility and physician services were positive, which is consistent with complementarity. Standardized regression coef ficients indicate that physician services are the single most importan t determinant of facility services; however facility services are a le ss important determinant of physician services. A 10% increase in phys ician services is associated with at least a 3.0% increase in facility services. CONCLUSIONS. Proposals that reduce inpatient physician expe nditures also would reduce facility expenditures in the long-run.