The effect of physician-hospital affiliations on hospital prices in California.

During the 1990s, a record number of U.S. hospitals entered into some form of vertical combination with physicians. During the same period, many integrated hospital-physician arrangements broke up. Using data from California, we investigate whether such vertical activity affected hospital pricing. We find that neither integration nor disintegration was associated with significant changes in prices. Integration among rural hospitals is associated with large price decreases, but the sample of such hospitals is small.