How Does Participation in Medicare Accountable Care Organizations Affect Rural Hospital Financial Outcomes?

Research center:
Lead researcher:
Contact:
Project funded:
September 2020
Anticipated completion date:
August 2021

Building on existing research on the Accountable Care Organizations' (ACOs') model, ACO financial performance, and financial implications of hospital integration with ACOs and/or integrated health systems, the Center expects that, in general, ACO participation will strengthen hospitals' abilities to access advanced information technologies and data analytics, manage patients' health needs, and improve care coordination and thereby improve overall hospital financial performance. Such effects will affect not only hospitals' ability to serve Medicare patients, but also the overall efficiency and effectiveness in their care delivery.

Further, because of the program's emphasis on primary care, preventive care, and reduction of unnecessary inpatient care, the Center anticipates that ACO participation will increase hospitals' focus on outpatient services/revenues and decrease their focus on inpatient services/revenues. Rural hospitals face certain constraints (smaller scale and cost-based reimbursement), which will limit their ability to exploit the financial impact of ACO participation to some extent. Thus, the Center anticipates that the financial impact will be stronger among urban hospitals than among rural hospitals. Moreover, the effects of ACO participation will depend on hospital characteristics and market conditions. Cost structure and reliance on Medicare services may influence the extent to which ACO participation affects rural and urban hospitals' financial outcomes, which will be controlled in the analysis.

The Center's research hypotheses include:

Hypothesis 1: Controlling for baseline and time effects, ACO-participating hospitals will have higher operating margins than nonparticipating hospitals.

Hypothesis 2: Controlling for baseline and time effects, ACO-participating hospitals will have higher outpatient revenues than nonparticipating hospitals.

Hypothesis 3: Controlling for baseline and time effects, ACO-participating hospitals will have lower inpatient revenues than nonparticipating hospitals.

Hypothesis 4: ACO participation will affect urban hospitals' financial outcomes more than rural hospitals' financial outcomes.