Hospital Cost and Quality Trends before and after ACO Adoption

Research Objective:  Accountable care organizations (ACOs) are an innovation in health care reform designed to curb cost growth while encouraging the provision of high-quality care. Providers who have had favorable cost and quality trends may be more likely to form ACOs because they expect to profit from changes that are already underway within their organization. We explore this hypothesis by examining trends in hospital cost per discharge and in-hospital mortality rates among hospitals that formed ACOs and those that did not, incorporating several years of data preceding ACO formation.

Study Design:  Retrospective longitudinal panel study drawing upon inpatient encounters clustered within hospitals. We obtained patient encounter data from the Agency for Healthcare Research and Quality (AHRQ) Healthcare Cost and Utilization Project (HCUP) State Inpatient Databases (SID) and hospital data from the American Hospital Association (AHA) Annual Survey and AHA Survey of Care Systems and Payment. We compared growth rates in cost per discharge and in-hospital mortality rates for acute myocardial infarction, heart failure, acute stroke, gastrointestinal hemorrhage, hip fracture, and pneumonia. Data were from 2008 to 2011 (pre-ACO) and 2011 to 2012 (post-ACO) for hospitals that did and did not implement ACOs. We also explored whether there were distinct trends based on ACO leadership structure—hospital-led, physician-led, or jointly-led by the hospital and the physician group.

Population Studied:  We analyzed 42,341,150 inpatient encounters, irrespective of age or payer, occurring in 837 community nonrehabilitation hospitals located across 40 states between 2008 and 2012.

Principal Findings:  Between 2008 and 2011, the average rate of growth in cost per discharge for hospitals that adopted ACOs was less than one-third of the rate among hospitals that remained unaffiliated (0.59% vs 2.02%). Parsing ACO-affiliated hospitals by leadership structure accentuated the contrast. Among ACOs in which the hospital assumed a leadership role, mean cost per discharge declined during the pre-ACO period at an average rate of 0.55% for hospital-led ACOs and 1.52% for jointly-led ACOs. Cost per discharge during the post-ACO period grew at a rate of 1.99% among all ACO hospitals and 1.02% among non-ACO hospitals. Hospital-led ACOs experienced a 1.95% increase in cost per discharge between 2011 and 2012, while cost per discharge among jointly-led ACOs fell by only 1.27%. Analysis of in-hospital mortality rates did not reveal persistent trend differences between ACOs and unaffiliated hospitals across all conditions.

Conclusions:  Hospitals that adopted the ACO model had more favorable cost trends between 2008 and 2011 than hospitals that did not adopt the model, which suggests non-random selection of providers opting to participate in ACO initiatives. In the post-ACO adoption period (2011 to 2012), hospitals that were part of jointly-led ACOs had the lowest cost growth, suggesting that this ACO structure may be the most effective.

Implications for Policy or Practice:  Policymakers should be mindful of pre-existing cost trends when evaluating the impact of early ACO adopters. Further, results of the evaluations of later ACO adopters may diverge from those of the early adopters because the former may have more inefficiencies that can be addressed.