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Same Story, Different Incentives: Evaluating the Impact of Racial and Ethnic Minorities on Medicare ACO Performance

Undergraduate Thesis
Andrew Labott

Health care expenditures in the United States have risen dramatically over the past twenty years, representing almost one in every five U.S. dollars spent in 2018. This has prompted the development of new governmental ways to pay for health care, one of the largest efforts being accountable care organizations (ACOs) within Medicare. ACOs have been successful in reducing spending while maintaining or improving the quality of health care overall. However, there exists some evidence that ACOs with large proportions of racial and ethnic minorities lag behind in performance standards. The effect of racial and ethnic minority populations on ACO spending and health outcomes is not fully understood. This thesis compares ACO spending and health outcomes to traditional Medicare fee-for-service (FFS) data at varying proportions of minority patients in the beneficiary population. Ultimately, this thesis found that relative to FFS, more racially and ethnically diverse ACOs have lower total and per-capita spending, more emergency department visits, and unchanged readmission rates and overall mortality. This work concludes that ACOs preserve existing disparities in health expenditures and outcomes that minority patients have experienced historically. Future research should focus on understanding the exact mechanism of these dynamics as new payment models transform the U.S. healthcare system.