Are ACO-Affiliated Hospitals Narrowing Their PAC Networks?

Since the inception of Accountable Care Organizations (ACOs), affiliated health care stakeholders have experimented with various methods to help them achieve their goal of coordinating high-quality and cost-efficient care. ACOs were first implemented within the Medicare payment system in 2012, and ACO leaders continue to test care delivery transformation innovations to enable further opportunities for shared cost savings. One component of optimizing ACO efficiency is establishing a reliable network of high-performing providers across the care continuum.

Yesterday, Leavitt Partners released a white paper titled “No Evidence that ACO-Affiliated Hospitals are Narrowing Their PAC Networks.” This white paper details the findings from an analysis of Medicare claims data that was compared with ACO affiliation data from Torch Insight.™ Hospitals affiliated with or owned by an ACO are financially incentivized to manage the health and health care costs of their defined populations. One potential means of reducing unnecessary costs is to refer patients to fewer, higher-quality post-acute care (PAC) facilities following hospitalization.

To understand whether existing market trends exhibit the implementation of this strategy for cost savings within risk-bearing arrangements, Leavitt Partners researchers examined whether hospitals narrowed their PAC networks following affiliation with an ACO. Leavitt Partners hypothesized that hospitals affiliated with ACOs would narrow their PAC networks in order to decrease the variation in patient outcomes potentially attributable to the PAC, but found the opposite to be the case. Primary takeaways from the study include:

    1. An analysis of 2012-2016 Medicare claims data from hospitals with ACO affiliations compared to hospitals without ACO affiliations showed no evidence that hospitals participating in ACOs narrowed their PAC networks.
    2. On the contrary, Leavitt Partners found that hospitals expanded their PAC networks and discharged patients more equally among PAC providers, suggesting that PAC optimization has not occurred.
    3. Despite the similar trends in network competition over time, ACO-affiliated hospitals did have larger and more competitive networks overall and evidence showed that non-affiliated hospitals discharged to lower percentages of skilled nursing facilities over time.

Leavitt Partners researchers identified various factors that may play a role in trends around PAC network expansion, including the growing demand for PAC services with an aging population, and a potential scarcity of organizational resources that are needed to identify high-value providers and optimize referral processes. More focused alternative payment models such as BPCI or hospitals taking on downside risk may sufficiently incentivize a narrowing of PAC networks to reduce unnecessary costs. Based on these study results, ACO leaders, hospital decision-makers, and other stakeholders should recognize that identifying and referring to high-value post-acute care providers may still be a strong opportunity for ACOs to improve outcomes and lower costs.

The white paper can be downloaded here.