Apr 2011

ACOs Face Large Start-Up Costs Under Proposed Rules from CMS

Accountable Care Organizations (ACOs) will face large start-up costs under proposed rules issued on March 31 by the Centers for Medicare and Medicaid Services (CMS).

An ACO is an organization of health care providers that agrees to be accountable for cost, quality and the overall care of Medicare beneficiaries who are assigned to it. ACOs are mandated under the Affordable Care Act (ACA). Because ACOs represent a new health care delivery and payment model, the proposed regulations were eagerly anticipated by the healthcare community.

CMS estimates average start-up costs and first-year operating expenses of $1.7 million for an ACO. The large costs are due to the numerous and highly detailed requirements that organizations must meet in order to be allowed to participate as an ACO under the Medicare Shared Savings Program (MSSP) established by ACA. CMS expects that 1.5 to 4 million Medicare beneficiaries will align with an ACO in the first three years and that an estimated 300 to 800 ACOs will participate in the program. The median estimate of savings to the Medicare program over the three-year period is $510 million.

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Michael Silhol