Market Power, Transactions Costs, and the Entry of Accountable Care Organizations in Health Care

Market Power, Transactions Costs, and the Entry of Accountable Care Organizations in Health Care ACOs were promoted in the 2010 Patient Protection and Affordable Care Act (ACA) to incentivize integrated care and cost control. Because they involve vertical and horizontal collaboration, ACOs also have the potential to harm competition. In this paper, we analyze ACO entry and formation patterns with the use of a unique, proprietary database that includes public (Medicare) and private ACOs. We estimate an empirical model that explains county-level ACO entry as a function of: physician, hospital, and insurance market structure; demographics; and other economic and regulatory factors. We find that physician concentration by organization has little effect. In contrast, physician concentration by geographic site—which is a new measure of locational concentration of physicians—discourages ACO entry. Hospital concentration generally has a negative effect. HMO penetration is a strong predictor of ACO entry, while physician-hospital organizations have little effect. Small markets discourage entry, which suggests economies of scale for ACOs. Predictors of public and private ACO entry are different. State regulations of nursing and the corporate practice of medicine have little effect. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Market Power, Transactions Costs, and the Entry of Accountable Care Organizations in Health Care

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Publisher
Springer Journals
Copyright
Copyright © 2015 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-015-9467-y
Publisher site
See Article on Publisher Site

Abstract

ACOs were promoted in the 2010 Patient Protection and Affordable Care Act (ACA) to incentivize integrated care and cost control. Because they involve vertical and horizontal collaboration, ACOs also have the potential to harm competition. In this paper, we analyze ACO entry and formation patterns with the use of a unique, proprietary database that includes public (Medicare) and private ACOs. We estimate an empirical model that explains county-level ACO entry as a function of: physician, hospital, and insurance market structure; demographics; and other economic and regulatory factors. We find that physician concentration by organization has little effect. In contrast, physician concentration by geographic site—which is a new measure of locational concentration of physicians—discourages ACO entry. Hospital concentration generally has a negative effect. HMO penetration is a strong predictor of ACO entry, while physician-hospital organizations have little effect. Small markets discourage entry, which suggests economies of scale for ACOs. Predictors of public and private ACO entry are different. State regulations of nursing and the corporate practice of medicine have little effect.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jul 15, 2015

References

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