The start-up investment required to establish and sustain an Accountable Care Organization (ACO) is considerably higher — $11.6 to $26.1 million — than the $1.8 million estimated by CMS in its proposed rule for launch and one year of ongoing operations, according to a study by the American Hospital Association.
Caroline Steinberg, VP of Health Trends Analysis at the AHA, said CMS estimates missed the mark because they were based on the experience of physician group practices which already had many ACO elements in place, such as hospital/doctor relationships. Also, most had EHRs implemented which they leveraged to participate in pay for performance programs. “That is very different from what CMS is trying to accomplish here — to move organizations that are currently operating on a fragmented and episodic basis.”
The study identifies a total of 23 different capabilities that must be developed across four categories to achieve the desired transformation in care delivery:
- clinical information systems
- data analytics
- network development and management
- care coordination, quality improvement and utilization management
Of these categories, Steinberg said clinical information systems or EHRs constituted the largest cost factor. “Upfront IT investment was the big-ticket item.”
She added that not having an EHR isn’t the only technology challenge. “Probably 80 percent don’t have an EHR, and those that do could be on any number of platforms,” Steinberg said. “There is a lot of investment needed for doctors to get EHRs, then much time and effort is required to get them to talk to each other.”
The information gathered from four case studies was used to create two hypothetical examples to estimate the start-up and ongoing costs of establishing an ACO. The first represents a single free-standing hospital, 80 primary care physicians and 250 specialists. The second example includes a five-hospital (1,200 bed) system, 250 primary care physicians and 500 specialists. The AHA sent a letter to Donald Berwick, CMS administrator, to highlight the findings.
Steinberg said the study was conducted to help the AMA craft an informed comment letter on CMS’s Accountable Care Organization notice of proposed rulemaking (NRPM).
The study was prepared for the AHA by McManis Consulting of Greenwood Village, Colo., and is based on studies of organizations that have already taken steps to manage the care of a defined population in a manner similar to that of an ACO. This work was completed prior to the release of the proposed rule; therefore it does not include estimates of the costs of meeting requirements specific to the Medicare Shared Savings Program. A second white paper addresses the management and strategic issues involved in establishing ACOs.