Industrial Organization Supply of Medical Services

Does physician-hospital integration reduce ACO cost?

The answer is ‘yes’ from a paper by Lin et al. (2024). Using 2009-2013 data from the Massachusetts All-Payer Claims Database, the authors measured physician–hospital integration within an accountable care organization (ACO) based on the proportion of primary care physicians (PCPs) in an ACO who billed for outpatient services with a place-of-service code indicating that there were employed by a hospital or the practice was owned by a hospital. The mapping of Massachusetts physicians and hospitals to ACOs came from the Massachusetts Registration of Provider Organizations (MA-PRO) data.

Patients who seek care at more integrated ACOs may differ from those who prefer less integrated ACOs. To address this concern, the authors used an instrumental variable method, where the instrument was the difference between the patient’s residence and the nearest PCP in a high-integrated ACO as compared to the distance between the residence an the nearest PCP in a low-integrated ACO. Outcomes included 30, 45, and 60-day expenditure, average length of stay, and 30-day readmission rates. Using this approach, they found that:

Physician–hospital integration was associated with a 10.6% reduction in 30-day expenditure (95% CI, −15.1% to −5.9%). Corresponding estimates for 45 and 60 days were − 9.7% (95%CI, −14.2% to −4.9%) and − 9.6% (95%CI, −14.3% to −4.7%). Integration was associated with a 15.7% decrease in LOS (95%CI, −22.6% to −8.2%) but unrelated to 30-day readmission rate.

You can read the full paper here.