New Study Questions CMS Estimate for Launching ACO on Nashville Medical News

New Study Questions CMS Estimate for Launching ACO

By: CINDY SANDERS

AHA Finds Actual Costs Significantly Higher

The American Hospital Association (AHA) and the Centers for Medicare & Medicaid Services (CMS) disagree on just how much it costs to launch and sustain an Accountable Care Organization (ACO).

In its proposed rule, CMS has estimated providers should be able to establish an ACO and operate it for the first year for a little under $2 million. In mid-May, the AHA released a study that finds the initial investment is considerably more. According to information gathered from four case studies, the actual cost to successfully manage care of a defined population across disciplines and entities ranged from $11.6-$26.1 million, depending on the hospital size.

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

The AHA figures are draft estimates based on pending case studies. The organization identified 23 different capabilities that would need to be developed across four broad categories — network development and management; care coordination, quality improvement and utilization management; clinical information systems; and data analytics — in order to achieve the desired transformation of care delivery.

Colorado-based McManis Consulting prepared the AHA study, which created two hypothetical examples of an ACO based on a series of case studies of organizations that have already undertaken steps to manage defined populations in a manner similar to that of an ACO.

At the lower end of the scale, a 200-bed, single hospital ACO with 80 primary care physicians and 250 specialists looked to incur more than six times what CMS has estimated for launch and first-year operations. The cost skyrocketed to more than 14 times the estimate when looking at an ACO involving 1,200 beds in a five-hospital system with 250 primary care physicians and 500 specialists.

The project was completed before the proposed rule was released and therefore doesn’t include estimated costs for meeting requirements specific to the Medicare Shared Savings Program.

Case study reports are available online at www.aha.org/ACOcasestudies.