Competitive Dynamics of Physician Referrals in the Era of Accountable Care Organizations

Sohyun Park, Russell Funk, Pinar Karaca-Mandic and Aks Zaheer

No 64ega, SocArXiv from Center for Open Science

Abstract: Advocates of healthcare reform are hopeful that accountable care organizations (ACOs) will not only help to bend the healthcare spending curve, but also lead to better quality, through reduced care fragmentation, enhanced care coordination, and overall improved collaboration among providers. In this paper, we propose an alternative view to evaluating ACO outcomes: examining how ACOs may affect care spending and quality through changes in market structure and concentration of referrals between healthcare providers. Such a perspective promises to provide fresh insights on unpacking the extent to which ACOs have fulfilled the expectations that predicated their creation. We approach this question by creating a novel, referral-based measure of market concentration. We combine several datasets, including patient referral data, data on ACOs in the Medicare Shared Savings Program, and data on regional healthcare markets. We find a complex, contingent relationship between ACO entry and referralbased market concentration. Whereas increases in the number of ACOs is negatively associated with concentration, the percentage of local providers participating in ACOs mitigates such association, suggesting that the competitive implications of ACOs depend on the nature of ACO entry. Our results also point to market structure as an important mechanism through which ACOs affect healthcare spending. Further, while referral-based market concentration is negatively associated with healthcare spending, the negative association is mitigated by the nature of ACO entry. In addition, the association between the percentage of local providers in ACOs and healthcare spending also depends on the number of ACOs established.

Date: 2022-05-30
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:64ega

DOI: 10.31219/osf.io/64ega

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