We measure organizational concentration-the distribution of a patient's healthcare across organizations-to examine how firm boundaries affect healthcare efficiency. First, when patients move to regions where outpatient visits are typically concentrated within a small set of firms, their healthcare utilization falls. Second, for patients whose PCPs exit the market, switching to a PCP with 1 standard deviation higher organizational concentration reduces utilization by 21%. This finding is robust to controlling for the spread of healthcare across providers. Increases in organizational concentration predict improvements in diabetes care and are not associated with greater use of emergency department or inpatient care.
Keywords: D23; I11; L14; boundaries of the firm; communication; fragmentation; healthcare; organizations; transaction costs.