The Impact of Health System Affiliation on Hospital Resource Use Intensity and Quality of Care

Research Objective: Healthcare spending in the U.S. is projected to top three trillion dollars in 2014 and account for 17% of GDP. To bend the cost curve and improve the quality of care, policymakers have focused on aligning the incentives of stakeholders to motivate the achievement of higher quality care at lower cost. This has included encouraging new ways of organizing and reimbursing care. Previous research has found that health care system membership influences cost and quality outcomes, but that the impact depends on health system characteristics. Health systems characterized by centralized decision making may generate better patient outcomes and reduced costs because they have a systematic, data-driven approach to identifying quality issues and implementing solutions. Health systems that own managed care plans may have an incentive to maintain or improve quality while reducing unnecessary resource use. The purpose of this study is to assess the impact of health system affiliation, centralization, and managed care plan ownership on hospital cost per discharge and quality.

Study Design:  We obtained hospital discharge data from the Agency for Healthcare Research and Quality (AHRQ) Healthcare Cost and Utilization Project (HCUP) State Inpatient Databases (SID), and hospital survey data from the American Hospital Association (AHA) Annual Survey of Hospitals, for the years 2010 through 2012. We linked the HCUP discharge data to the AHA data to identify hospital characteristics including health system membership, centralization, and health plan ownership. We estimated hierarchical linear models to measure the relationship between hospital health system membership, centralization, and health plan ownership and three outcomes: cost per discharge, days per stay, and quality. Quality was measured using AHRQ inpatient quality indicators (IQIs) which focus on risk-adjusted mortality rates. All models adjusted for market and patient characteristics that may independently influence outcomes.

Population Studied:  The sample included approximately 99 million total discharges from 3,957 unique hospitals across 44 states.

Principal Findings:  Hospitals affiliated with health systems, and centralized systems in particular, had a higher cost per discharge, similar length of stay, and better quality compared to independent hospitals. However, among hospitals with managed care ownership, there was no differential effect of system affiliation or degree of centralization on cost per discharge.

Conclusions:  Hospitals that are part of centralized health systems and that own managed care products have lower risk-adjusted mortality rates than other hospitals. Increased exposure to risk may be necessary to see differences in costs per discharge.

Implications for Policy or Practice:  Our results provide insight into the potential effect of Accountable Care Organizations (ACOs) on patient outcomes, as many hospital-led ACOs are structured similarly to the health systems we examine in this study. In particular, based on these findings, we might expect ACOs to have better quality than non-ACOs but not lower costs.