Nine rural providers test out ACO initiative

A new model that could allow smaller providers to participate in the Medicare Shared Savings Program without the usual massive upfront costs or large patient base is being tried as nine rural health providers kick off their participation in the 2014 initiative.

The group is participating in the National Rural ACO, an initiative designed to help rural providers that don't have the deep pockets, size or scale to participate in the CMS program on their own.

Many rural health providers have been shut out of accountable care and other value-based payment initiatives because they lack the capital and infrastructure to make the necessary investments in personnel, information technology and data analytics expertise.

The National Rural ACO, which launched four years ago in California, will provide the centralized services such as building a data warehouse for participants, according to Lynn Barr, strategic adviser for the group. Hospitals participating in the CMS program will be eligible for shared savings, but will not take on any financial risk.

CMS ACOs are required to have at least 5,000 Medicare beneficiaries, which can be a barrier to smaller rural providers. In addition, the CMS estimates that average start-up costs and first year operating expenses can total $1.7 million, more than many rural health providers have to invest.

And that cost estimate might be on the low end. Start-up costs for 2012 and 2013 participants in a Medicare ACO program have averaged $2 million, according to a survey from the National Association for ACOs. That figure doesn't include feasibility studies or application and legal fees

Spending on information technology has totaled about $850,000 for the average ACO, the survey found.

Moreover, because of the two-year cycle for CMS results, ACOs will have to commit $3.5 million before they see any return from possible savings, the association said in a release. About one-third of ACOs have financed that cost with debt, the group added.

Yet for the nine rural participants, the investment required is only $120,000, Barr said. The participating communities have set up care coordination and narrow referral networks, and are using a data analytics tool from Lightbeam Health Solutions to track real-time utilization trends.

“We see instant change,” Barr said. “The impact is immediate.”

The founding group includes Margaret Mary Community Hospital, Batesville, Ind.; Memorial Hospital, Logansport, Ind.; Alcona Health Centers, Lincoln, Mich.; McKenzie Health System, Sandusky, Mich.; Mammoth Hospital, Mammoth Lakes, Calif.; Northern Inyo Hospital, Bishop, Calif.; Southern Inyo Healthcare District, Lone Pine, Calif.; Ridgecrest (Calif.) Regional Hospital; and John C. Fremont Healthcare District, Mariposa, Calif.

The National Rural ACO is also recruiting a cohort for 2015. Letters of intent are due April 1, and the group will apply to participate in the Shared Savings Program during the summer.

Follow Beth Kutscher on Twitter: @MHbkutscher