Performance of Accountable Care Organizations: Health Information Technology and Quality–Efficiency Trade-Offs

Accountable care organizations (ACOs) were established under the Affordable Care Act to address systemic problems afflicting the U.S. healthcare system related to high costs and poor quality issues. ACOs represent groups of healthcare providers that are responsible for coordinating patient care with the goal of improving health outcomes for their patient population. To develop a better understanding of the role of health information technology (IT) in a value-based care environment, we study (a) whether there are potential trade-offs between ACO efficiency and quality and (b) whether effective use of health IT enables ACOs to balance competing efficiency and quality objectives. We test our models with a nationwide sample of ACO data using a two-stage approach based on data envelopment analysis and econometric estimation. We observe that efficient ACOs do not make trade-offs with respect to healthcare quality, compared with inefficient ACOs. Furthermore, we observe that hospitals that participated in ACOs, and used IT effectively for care coordination with other providers, exhibited a positive association between efficiency and quality. ACOs with higher levels of meaningful use achievement of health IT demonstrate better patient health outcomes because of greater information integration with other care providers. Our findings imply that value-based incentives alone are not sufficient to resolve trade-offs between healthcare quality and efficiency, and healthcare policy needs to incorporate appropriate incentives to foster effective IT use for health information sharing and care coordination between healthcare providers.