Does Reducing Hospital Readmission Rate Decrease the Inpatient Health Expenditure in Medicare Accountable Care Organizations?

Abstract

The Accountable Care Organizations (ACOs) is a new delivery model initiated by the Affordable Care Act to reform the current fee-for-service payment structure, control the skyrocketing healthcare costs in recent years, and improve providers’ performance. This study utilizes the public-use data from the Center for Medicare and Medicaid Services (CMS) and performs a multivariate regression analysis of per capita health expenditure on a variety of variables include readmission rate per 1,000, size, demography and several performance metrics. The result shows strong statistical significance between per capita health expenditure and hospital readmission rates, which strengthens the study’s hypothetical model and underlying assumptions. This study is the first attempt to evaluate an innovative delivery model of ACA using quantitative tools, and provides interesting insights into the country’s healthcare reform discussion.