What are ACO start-up costs?

That's the"$64,000 question" as the final rule was released last week. The projected start-up costs of an accountable care organization (ACO) can vary widely, depending on who you talk to. The Centers for Medicare & Medicaid Services (CMS) estimates that it will take $1.7 million per ACO, based on a 2008 study of the Physician Group Practice Demonstration project, according to an Institute for Health Technology Transformation white paper released last week. The American Hospital Association (AHA), however, estimates ACO start-up costs are between $5.3 to $12 million, depending on hospital size. The Institute for Health Technology Transformation reports that it could take $7.5 to $11.3 million for a 200-bed hospital or $1 to $11.7 million for a 200-physician practice.

The report cites cost estimation variations due to technology usage.

"Any organization looking to become an ACO must accurately assess its current IT capabilities and what IT assets will be required to realize shared savings," states the report.

Providers interested in accountable care have much to consider regarding technology: patient engagement, data aggregation, population health management, privacy and security, clinical and administrative data exchange, performance management, reporting infrastructure, and finances. In addition, hospitals and health systems must consider the existing technologies of payers and individual physicians that they plan on partnering with.

CMS estimates that providers should prepare themselves for 15 to 20 percent of the initial IT costs for ongoing maintenance, and AHA estimates ongoing costs would be 24 to 28 percent.

"Depending on an organization's current technology usage, system capabilities, and ACO requirements, the path to ACO status could be very complex," the report states. "Managers would be well-advised to seek additional information before deciding to apply for ACO status."

For more information:
- check out the report (.pdf)

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