Evaluation of US Hospital Episode Spending for Acute Inpatient Conditions After the Patient Protection and Affordable Care Act

IMPORTANCE: Under the Patient Protection and Affordable Care Act (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. Other provisions enacted in the ACA and under budget sequestration (beginning in 2013) mandated Medicare fee cuts. OBJECTIVE: To evaluate the association between the enactment of ACA reforms and 30-day price-standardized hospital episode spending. DESIGN, SETTING, AND PARTICIPANTS: This policy evaluation included index discharges between January 1, 2008, and August 31, 2015, from a national random 20% sample of Medicare beneficiaries. Data analysis was performed from February 1, 2019 to July 8, 2020. EXPOSURE: Payment reforms after passage of the ACA. MAIN OUTCOMES AND MEASURES: 30-day price-standardized episode payments. Three alternative estimation approaches were used to evaluate the association between reforms following the ACA and episode spending: (1) a difference-in-difference (DID) analysis among acute care hospitals, comparing spending for diagnoses commonly targeted by ACA programs with nontargeted diagnoses; (2) a DID analysis comparing acute care hospitals and critical access hospitals (not exposed to reforms); and (3) 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. RESULTS: A total of 7 634 242 index discharges (4 525 630 [59.2%] female patients; mean [SD] age, 79.31 [8.02] years) were included. All 3 approaches found that reforms following the ACA were associated with a significant reduction in episode spending. The DID estimate comparing targeted and untargeted diagnoses suggested that reforms following the ACA were associated with a −$431 (95% CI, −$492 to −$369; −2.87%) change in total spending, while 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. Cuts to Medicare fees accounted for most of these savings. CONCLUSIONS AND RELEVANCE: In this policy evaluation, the ACA was associated with large reductions in US hospital episode spending.