I had to create a new email account in Outlook 2016. I was doing a backup of my PST file, and I discovered that the new account had been associated with an OST file. I am concerned about how backup and recovery will work for the OST file.

Did I do something wrong when I created the new account? Should I just recreate it and tie it to my PST file?

There is a quite difference between OST and PST files. You can't directly convert your PST file to OST format; instead of this, you must create an exchange account in Outlook, then add PST file to the folder list, then move/copy the data out of the PST into the Exchange account.