The proposed rules for Medicare accountable care organizations predict that an ACO would cost $1.73 million to start up. Paul Keckley, director of the Deloitte Center for Health Solutions, thinks that figure is too low, but he declines to make his own estimate. Costs would vary widely, depending on how much infrastructure is already in place and on "soft" costs that are hard to pinpoint. "The actual figure could be all over the place," he says.
Mr. Keckley also doesn't expect an ACO will quickly earn back its start-up costs. It may take some time for the organization to see significant earnings on shared savings, he says. Nevertheless, Mr. Keckley sees the ACO structure as a good investment for other collaborative arrangements, such as creating medical homes, reducing readmissions and bundling payments. "The question is, 'Is this going to be where the puck's going?' " he says. If all of healthcare is moving in this direction, "it's not a question of calculating a specific ROI."
Here Mr. Keckley lists five areas of start-up costs for ACOs.
1. Managing the ACO. A small ACO with the minimum of 5,000 beneficiaries would have a management team of a half-dozen people. They would be involved in such matters as contracting with outside parties, distributing shared savings, setting aside funds to cover downside risk and managing data. "It's a small business with a number of moving parts," he says.
2. Creating care pathways. The ACO would need to build "care pathways," which are step-by-step directions for dealing with each type of patient. For example, various caregivers would have to make sure a patient with a certain chronic condition makes an appointment every 90 days. Bloodwork would be completed beforehand so it is available at the visit. The pathway might call for a nurse practitioner to examine the patient and a primary care physician to review the chart. To orchestrate the extensive work of building care pathways, the ACO would need to hire a general internist full-time for six months, Mr. Keckley says. Other costs in the process are harder to pinpoint, because they involve bringing together physicians and other clinicians in committees to work out the care pathways. It is not clear whether committee members would have to be paid.
3. Recruiting participants. Physicians and other participants have to be committed to the ACO from the start. But Mr. Keckley does not think this would be difficult. He calculates that only three to four primary care physicians would be needed to treat patients in a small ACO with as few as 5,000 assigned Medicare beneficiaries. The ACO would also need to pay nurses and allied health professionals to track patients and coordinate their care. Nutritionists, psychologists, pharmacists and other personnel would engage in "health coaching" so that patients could develop "mindful daily practices," he says.
4. Retraining providers. The ACO would need to make sure physicians and other caregivers overcome cultural barriers against working in teams and following care pathways. Physicians would also need to learn how to exercise leadership. Another challenge: "How do you address behavior of physicians who are not practicing the guidelines?" Mr. Keckley asks. The cost of all of these activities is hard to pinpoint.
5. Managing data. Cost and clinical data will be at the heart of an ACO. The organization will need to dedicate people from within the sponsoring organization to carry out these functions. They would need to be reassigned from other departments, but their ACO-related work could possibly be part-time work in a smaller ACO. The organization would also need to buy extra software to extrapolate the data make sure participating physicians have IT connectivity.
Learn more about the Deloitte Center for Health Solutions.
Mr. Keckley also doesn't expect an ACO will quickly earn back its start-up costs. It may take some time for the organization to see significant earnings on shared savings, he says. Nevertheless, Mr. Keckley sees the ACO structure as a good investment for other collaborative arrangements, such as creating medical homes, reducing readmissions and bundling payments. "The question is, 'Is this going to be where the puck's going?' " he says. If all of healthcare is moving in this direction, "it's not a question of calculating a specific ROI."
Here Mr. Keckley lists five areas of start-up costs for ACOs.
1. Managing the ACO. A small ACO with the minimum of 5,000 beneficiaries would have a management team of a half-dozen people. They would be involved in such matters as contracting with outside parties, distributing shared savings, setting aside funds to cover downside risk and managing data. "It's a small business with a number of moving parts," he says.
2. Creating care pathways. The ACO would need to build "care pathways," which are step-by-step directions for dealing with each type of patient. For example, various caregivers would have to make sure a patient with a certain chronic condition makes an appointment every 90 days. Bloodwork would be completed beforehand so it is available at the visit. The pathway might call for a nurse practitioner to examine the patient and a primary care physician to review the chart. To orchestrate the extensive work of building care pathways, the ACO would need to hire a general internist full-time for six months, Mr. Keckley says. Other costs in the process are harder to pinpoint, because they involve bringing together physicians and other clinicians in committees to work out the care pathways. It is not clear whether committee members would have to be paid.
3. Recruiting participants. Physicians and other participants have to be committed to the ACO from the start. But Mr. Keckley does not think this would be difficult. He calculates that only three to four primary care physicians would be needed to treat patients in a small ACO with as few as 5,000 assigned Medicare beneficiaries. The ACO would also need to pay nurses and allied health professionals to track patients and coordinate their care. Nutritionists, psychologists, pharmacists and other personnel would engage in "health coaching" so that patients could develop "mindful daily practices," he says.
4. Retraining providers. The ACO would need to make sure physicians and other caregivers overcome cultural barriers against working in teams and following care pathways. Physicians would also need to learn how to exercise leadership. Another challenge: "How do you address behavior of physicians who are not practicing the guidelines?" Mr. Keckley asks. The cost of all of these activities is hard to pinpoint.
5. Managing data. Cost and clinical data will be at the heart of an ACO. The organization will need to dedicate people from within the sponsoring organization to carry out these functions. They would need to be reassigned from other departments, but their ACO-related work could possibly be part-time work in a smaller ACO. The organization would also need to buy extra software to extrapolate the data make sure participating physicians have IT connectivity.
Learn more about the Deloitte Center for Health Solutions.