Are networks key to solving America’s healthcare crisis?

Total U.S. healthcare expenditures are the highest in the world, at 17 percent of GDP, or roughly $3 trillion. But U.S. healthcare outcomes are ranked no better than 37th in the world. Understanding how to “bend the curves” of ever-increasing cost and diminishing quality outcomes consequently emerges as a most complex and difficult conundrum for society today.The Affordable Care Act of 2010 introduced an organizational innovation—the Accountable Care Organization, or ACO—which combines incentives for cost reduction with incentives for healthcare quality. Within this context, we ask: How can ACOs overcome clinical and administrative complexity in the process of delivering lower cost and higher quality care? Using large Medicare datasets of up to 60 million and fixed effects models over the period 2013-2015, we seek to demonstrate that when the network of relationships among ACO member organizations is stronger and better integrated, cost and quality outcomes are superior.