Hospital ownership of post acute care facilities and readmission rates: A resource dependence and transaction cost approach

Due to recent Affordable Care Act reforms, prevention of readmissions is a salient issue for hospitals that participate in Medicare, as they are now held accountable for patients who receive post-acute care in facilities over which hospitals have little influence to monitor care. Using resource dependence and transaction cost economics to describe the theoretical advantages of hospital ownership of post-acute care facilities (PACs), we empirically test whether hospitals that own PACs experience reduced readmissions. Our findings indicate partial support for the predicted relationship between PAC ownership and readmission rates. We found that hospital ownership of a skilled-nursing facility (SNF) was related to a lower readmissions rate for some patients, while ownership of other types of PACs did not result in significant findings. Our results offer support for the theoretical advantages of ownership, however, the savings realized by ownership may not merit the ownership investment.