Examining network entry decisions in healthcare: Network and organizational characteristics

Accountable Care Organizations (ACOs) are healthcare collaboration networks comprised of hospitals and other healthcare providers. The motivation behind the formation of ACOs is to improve the quality of care while reducing healthcare costs. Despite these commendable goals, hospitals’ participation in ACOs remains low; the most significant barrier being the risk associated with joining. Our research tackles this timely and potentially impactful topic by exploring factors that facilitate hospitals' ACO entry decisions. We apply resource dependence theory to explain that competition network characteristics, organizational network characteristics, and internal organizational characteristics mitigate hospitals’ financial risk and are therefore critical to ACO participation. Using survival analysis, we test our research hypotheses using longitudinal data from 3114 hospitals. Our findings suggest that hospitals with a high level of competition network centrality are more likely to join an ACO, while hospitals with a high level of competition network tie diversity are less likely to join. In addition, hospitals with experience in joining other healthcare networks, such as Regional Healthcare Information Organizations, or belonging to a large parent group, are inclined to enter an ACO. Lastly, hospitals with a high level of unabsorbed slack are prone to ACO participation. Given that knowledge of hospitals’ participation in ACOs is lacking, this research is relevant for practitioners in the US healthcare industry. Specifically, it provides insights for hospital administrators on the critical resources that need to be strengthened before joining an ACO. Our findings also provide practical guidance for healthcare policy makers on how to profile, target, and efficiently promote ACO participation among hospitals.