ACO start-up costs higher than estimated, AHA study says

Accountable care organizations will likely face start-up and first-year costs six to 14 times higher than HHS has estimated, according to a study (PDF) released by the American Hospital Association.

The study, which was based on an analysis of previous research, concluded that the various elements required to successfully manage the care of a specific population will cost between $11.6 million and $26.1 million—depending on the size of the hospital or hospital system involved in the ACO—and far more than the $1.8 million estimated by the CMS in its proposed rule.

“The shared savings rate with ACOs should be adjusted to reflect these costs in order to encourage and enable participation in this important program,” Richard Umbdenstock, president and CEO of the AHA, said in a written statement.

The cost findings are based on 23 different capabilities that ACOs will need to develop across four categories: network development and management; care coordination, quality improvement and utilization management; clinical information systems; and data analytics.

The study was prepared for the AHA by McManis Consulting of Greenwood Village, Colo., and is based on a series of case studies of entities that tried to manage the care of a defined population similarly to that of an ACO. However, the study's analysis was completed before the proposed ACO rule was released in March 31, so its estimates do not include the costs of meeting specific requirements of the ACO program, known as the Medicare Shared Savings Program.