June 28, 2011 | | Comments 14
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ACO fuzzy math?

The details surrounding the proposed rules for creating an accountable care organization (ACO) continue to become more complicated—specifically the cost associated with establishing and sustaining an ACO.  The Centers for Medicare & Medicaid Services (CMS) originally estimated a cost of $1.8 million in its proposed rule for start-up and one year of ongoing operations.  Now, according to the American Hospital Association (AHA) study released in mid-May, the start-up investmentmay not be accurately represented by the number that CMS released.  The study found that the cost associated with the elements necessary to manage the care of a population is much higher.  The study revealed start-upcosts of $5.3 million to $12.0 million based on size of the hospital or health system.  That’s a far cry from $1.8 million.

According to the AHA, CMS falls well short on their estimation.  It doesn’t necessarily surprise me that CMS would underestimate the costs of establishing and running a successful ACO.  After all, they don’t operate a business.  However, these numbers are extremely far apart, and it seems to me that this is something that may reflect how little is truly certain or reliable about the costs associated with ACOs.  To me, it seems prudent to re-evaluate the ACO cost models before putting the regulations in place.  So what do you think? Whose estimation should we trust more? Should we believe the true number is somewhere in the middle? Or do we need to sharpen the pencils again to determine the real costs of launching an ACO?

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Filed Under: Physician compensation and employmentPhysician-hospital alignment


Error: Unable to create directory uploads. Is its parent directory writable by the server? About the Author: Kirk Mathews is the CEO, principal, and founder of Inpatient Management, Inc., a national hospitalist management company in St. Louis. Prior to cofounding Inpatient Management in 1997, he was senior vice president of Cejka & Company, responsible for managing one of the nation's largest physician recruiting enterprises with a search portfolio of over 300 clients. His experience includes management, sales, operations, recruiting strategy, physician compensation and benefits planning and design, and employment contract design and negotiations. In 1989, he served as vice president of Clayton Medical Associates after serving as senior recruiting consultant with Jackson & Coker, the nation's largest physician recruiting firm at the time. Mathews received his B.S. in accounting and MBA from Northwest Missouri State University. Mathews is a member of the the Society of Hospital Medicine.

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