Profit Sharing & Patient Steering: Joint Ventures in Dialysis
Ryan McDevitt, Duke University
Health care markets have consolidated in recent decades, with increases in both horizontal and vertical ownership ties. We study the implications of shared ownership along both of these dimensions in the U.S. market for outpatient dialysis using a new dataset of mergers, acquisitions, and joint ventures between dialysis chains and local partners such as physicians. We first provide novel evidence of the growth and prevalence of joint ventures in dialysis facilities, which nearly tripled from 9.8% in 2005 to 29.8% in 2017. Using a difference-in-differences framework, we find that joint ventures result in much larger gains in market share compared to acquisitions but relatively similar changes in practices. We also provide evidence that these gains in market share stem largely from business stealing and that patient steering at joint ventures may serve as a barrier to potential entrants. We conclude by connecting these results to technological and analytical innovations within the dialysis industry.