What Factors Influence Rural Hospitals' Participation in Accountable Care Organizations?

Research center:
Lead researcher:
Xi Zhu, PhD, 319.384.3829, xi-zhu@uiowa.edu
Project funded:
September 2018
Project completed:
April 2020

The purpose of this research was to discern why some rural hospitals choose to participate in Accountable Care Organizations (ACOs) while others do not. Public policymakers, both at the federal and state level, continue to encourage ACO development as a strategy to achieve the goals of better health, better care, and lower costs. The number of Medicare ACOs continues to grow. Now, 561 ACOs participate in the Medicare Shared Savings Program and 51 ACOs participate in the Medicare Next Generation ACO Model. Together, these ACOs have been serving more than 12.6 million Medicare beneficiaries. At the same time, the number of Medicaid ACOs and ACOs established by commercial payers also increases. Many states have implemented Medicaid ACOs: 12 states currently have active Medicaid ACO programs and at least 10 more states are developing such programs. In general, the ACO models are designed to incentivize providers to deliver value-based care by holding providers financially accountable for the health of the patient population they serve. At the program level, the Centers for Medicare & Medicaid Services reports that Medicare ACOs continue to achieve cost savings and improve quality. However, not all provider organizations are well positioned to change care delivery in ways that achieve the primary goals of ACOs: lower cost (measured as expenditures below cost benchmarks) and better quality (measured as performance at or above quality benchmarks). Rural hospitals often have limited infrastructure, different cost structures, and unique market circumstances that make them underprepared or disadvantaged in the ACO programs. These circumstances may affect rural hospitals' and their potential partners' (e.g., urban health systems and physician groups) assessment and decision to engage the rural hospitals in forming ACOs.

Our research explained what factors influenced rural hospitals' participation in ACOs despite the inherent challenges. The literature suggests that ACO participants need to have or develop capabilities to coordinate and integrate care, oversee provider activities, and manage financial risk. There is limited empirical research that examines what internal or external factors influence the participating organizations' decision to form or join ACOs. A study by Bazzoli, Harless, and Chukmaitov finds that most of the hospitals participating in Medicare ACOs at the beginning of the program (2012-2013) had developed electronic health record (EHR) capabilities, and a subgroup of hospitals had established certain arrangements for physician alignment such as physician employment, practice ownership, or physician-hospital organizations. This study also reports that there were other subgroups of participating hospitals that had low EHR and care management capabilities, suggesting that findings related to internal factors associated with ACO participation are inconclusive. No published research has examined a wide array of internal and external factors that may facilitate participation in ACOs; nor do we know what factors distinguish participating hospitals from non-participating hospitals. This project examined hospital ACO participation with a specific focus on rural hospitals.

Extending research from the experience of rural ACOs to that of participating rural hospitals is an important next step toward understanding decisions at the local hospital level during the formation of ACOs. There are strong reasons to expect that, when joining ACOs, rural hospitals face different considerations and expectations than their urban counterparts due to factors such as organization scale, internal capacities, market and population characteristics, and payment structures in Medicare and Medicaid. Understanding such factors will inform further policy development to address rural-specific issues that hinder rural hospitals' participation in ACOs.


  • Rural Hospital Participation in Medicare Accountable Care Organizations
    Policy Brief
    RUPRI Center for Rural Health Policy Analysis
    Date: 04/2020
    This policy brief summarizes national and regional rates of rural hospital participation in Medicare Shared Savings Program Accountable Care Organizations (ACOs) and identifies factors associated with ACO participation.