Hospital ACO Participation Shows Limited Impact on Emergency Department Admissions and Costs

Hospital participation in Medicare Accountable Care Organizations (ACOs) has not been associated with significant changes in emergency department (ED) admission rates, hospital length of stay (LOS), or total costs for unplanned hospitalizations up to five years after joining the ACO program. This analysis included 995 hospitals that joined Medicare ACOs between 2012 and 2017, compared with hospitals that did not join ACOs, using Medicare fee-for-service data from 2008 to 2019. ACOs are groups of providers aiming to improve care coordination and share savings from reduced spending, with growing participation and the inclusion of downside risk contracts. Despite the expansion of hospital-led ACOs, this study found no significant impact on acute care utilization or efficiency during emergency hospital encounters. Differences in hospital admission rates and observation stays from the ED, LOS, and standardized costs showed parallel trends between ACO and non-ACO hospitals, with no statistically significant differential changes detected. These findings remained consistent across various ACO program types (Medicare Shared Savings Program, Pioneer, Next Generation), leadership types (hospital-led, physician-led, joint), and the presence of downside risk contracts. The study suggests that hospital-owned or -led ACOs are limited in their ability to alter hospital behavior or inpatient resource use for emergent admissions under current Medicare payment models. Physician-led ACOs may better influence upstream care coordination and prevention strategies that reduce hospitalizations. Hospitals face structural challenges in fee-for-service reimbursement that diminish incentives to reduce admissions or length of stay, as potential savings from ACO participation may be small compared to lost revenue from fewer acute care services. The study emphasizes the importance of stronger financial incentives, multipayer alignment, and broader value-based contracting to motivate hospitals to reduce acute care costs. Current Medicare ACO programs, particularly for hospital-based ACOs, may not sufficiently influence acute care delivery, highlighting a need for policy refinement and alternative strategies to improve cost efficiency in emergent hospital care. The research utilizes rigorous difference-in-differences methodology controlling for hospital characteristics, market factors, and patient case mix across multiple years. Limitations include the focus on patients presenting through the ED rather than planned admissions and challenges in attributing beneficiaries to specific ACO contracts. These insights inform health policy and payer strategies regarding the evolving role of hospitals in value-based payment models and the effectiveness of ACOs in transforming acute care utilization and cost outcomes in the Medicare population.