Tuesday, May 17, 2011
The 'All-ACO, All the Time' drumbeat continues. Cable television should create an ACO channel. Scratch that.
Early on, CMS said they thought starting an ACO would cost about $1.8 million. This was the investment nut that would have to be recovered from the cost savings realized by the ACO. ACO's are the mechanism that allow providers, physicians and hospitals, to participate in the Medicare Shared Savings Program.
The ROI calculation is pretty straight forward, at least on paper. 'We have to invest $1.8 million, and we get to keep 50% of the savings we generate. So, we need to be able to create $3.6 million of savings to break even.'
Along comes the American Hospital Association, waving a study it commissioned, saying, 'Wait a doggone minute. Based on the CMS demonstration projects, that start up number looks to be more like $11.6 to $26.1 million.' Big difference.
If that is the case, the savings required to break even is now somewhere between $23 and $50 million. Big difference.
And of course, AHA said CMS has to give ACOs more than 50% of the savings. Logical argument if you are trying to make that ROI spreadsheet turn from red to black.
Not a welcome argument if you are CMS and think the 50% pocketed by the government is one of the keys to bending the cost curve.
Stay tuned. We're on channel 774, high on your cable dial.
Tim Coan, CEO
SubscribeFill out the form below to receive updates on ALN Medical Management's WhatMatters blogs & podcast series.
You choose your level of contact. Would you like to be emailed weekly with updates to QuickHIT Posts, Tim's Blog, and announcements of upcoming webinars, or would you rather be emailed monthly with an overview of the months activity?
Please be sure to add email@example.com to your address book or your safe senders list.