Job Market Paper: Peer Participation in the Medicare Shared Savings Program

Abstract

Little is known about the role of practice interaction in program participation under the voluntary Medicare payment reform setting. A practice may select into a payment model based on the participation decision of their peer practices with whom they are closely connected through shared patients. In this paper, we estimate peer effects in practice’s decision to participate in Accountable Care Organizations (ACO) under the Medicare Shared Savings Program (MSSP). Using the combination of lagged peers (and their lagged participation), practice-level fixed effects, and the plausibly exogenous variation induced by a unique network structure (“peers-of-peers"), we show evidence of positive peer effects in practice’s decision to participate in the MSSP. The presence and magnitude of peer effects differ by the organizational types of index practices and their peer groups. We also explore two potential channels underlying the observed peer effects, including social learning and recruitment effects. Leveraging whether the index practice joins an existing ACO or forms a new one, we show suggestive evidence in favor of the recruitment channel, where early participating peers may induce others to join an existing ACO. Our results suggest that peer effects are an important mechanism influencing practice selection into the MSSP. The role of peer effects in aligning voluntary participation across practices may have implications for other value-based care models.