The start-up and management costs of an accountable care organization (ACO) is considerably higher than estimated by the Centers for Medicare & Medicaid Services (CMS) in its proposed rule, according to the American Hospital Association.

The AHA study, released May 13, estimates start-up and an initial year of management for an ACO will run between $11.6 to $26.1 million, much higher than the $1.8 million estimated by CMS. 

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See also: HHS releases proposed ACO regulations.]

“CMS’ estimate falls short of the mark,” said Rich Umbdenstock, president and CEO of the AHA. “The shared savings rate with ACOs should be adjusted to reflect these costs in order to encourage and enable participation in this important program.”

Umbdenstock said he alerted CMS Administrator Donald Berwick of AHA's findings.

According to Umbdenstock, the study identified a total of 23 different capabilities that must be developed across four categories to achieve the desired transformation in care delivery using an ACO:

• network development and management

• care coordination, quality improvement and utilization management

• clinical information systems

• data analytics

[See also: CHIME calls for second take on ACO plan.]

According to AHA, 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 study was prepared for the AHA by McManis Consulting of Greenwood Village, Colo., and is based on a series of case 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. 

The study was completed prior to the release of the proposed ACO rule and does not include estimates of the costs of meeting requirements specific to the Medicare Shared Savings Program, according to AHA.

The AHA report can be found here.

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