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Association Between the Affordable Care Act, Hospital Episode Spending

November 24, 2020

According to recently published data, the policy reforms introduced under the US Patient Protection and Affordable Care Act (ACA) are associated with significant reductions in US hospital episode spending for acute inpatient hospitalizations.

Andrew M Ibrahim, MD, MSc, Institute for Healthcare Policy and Innovation, University of Michigan, Ann Arbor, MI, and colleagues conducted a policy evaluation of 7,634,242 episodes, with index discharges between January 1, 2008 and August 31, 2015. The data set represented a random 20% sample of Medicare beneficiaries.

“Under the ACA, US hospitals were exposed to a number of reforms intended to reduce spending, many of which, beginning in 2012, targeted acute care hospitals and often focused on specific diagnoses (eg, acute myocardial infarction, heart failure, and pneumonia) for Medicare patients,” explained Dr Ibrahim and colleagues. “Other provisions enacted in the ACA and under budget sequestration (beginning in 2013) mandated Medicare fee cuts.”

The researchers used three alternative estimation approaches which include:

  • a difference-in-difference (DID) analysis among acute care hospitals, comparing spending for diagnoses commonly targeted by ACA programs with nontargeted diagnoses;
  • a DID analysis comparing acute care hospitals and critical access hospitals (not exposed to reforms); and
  • a generalized synthetic control analysis, comparing acute care and critical access hospitals. Supplemental analysis examined the degree to which Medicare fee cuts contributed to spending reductions.

All three analysis approaches showed that the ACA is associated with reduced episode spending. The DID analysis in particular revealed a -$431 (95% CI, -$492 to -$369; -2.87%) change in total spending.

“…the generalized synthetic control analysis suggested that reforms were associated with a -$1232 (95% CI, -$1488 to -$965; -10.12%) change in total episode spending, amounting in a total annual savings of $5.68 billion,” found the researchers.

Changes and cuts to Medicare fees accounted for most of these savings, noted Dr Ibrahim and colleagues.
“Reductions in readmission rates and in the use of postacute care after discharge likely also contributed to savings,” concluded the researchers. “However, although we did not estimate this directly, Medicare fee reductions would also contribute to the associations of reforms with spending related to readmissions.”

—Edan Stanley

Ibrahim AM, Nuliyalu U, Lawton EJ, et al. Evaluation of US Hospital Episode Spending for Acute Inpatient Conditions After the Patient Protection and Affordable Care Act. JAMA Netw Open. 2020;3(11):e2023926. doi:10.1001/jamanetworkopen.2020.23926

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