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ACOs Generate High Interest, But Is Bar Set Too High?

Philip Betbeze, for HealthLeaders Media, April 22, 2011

According to the initial regs, ACO hopefuls can apply to enter the program with downside risk immediately or after the second year. But Sharp says that unless an organization has a fair amount of experience designing and dealing with risk, that's a difficult sell because "the infrastructure for many markets won't be there by year three."

And what about that infrastructure? In many cases, it will be expensive, from software to hardware to significantly different labor profiles, ACO hopefuls can expect to spend more, at least initially, to keep up with the leading edge of healthcare administration.

A second point is the level of the payoff threshold for either of the two models starts with achieving from 2% to 3.9% savings over traditional fee-for-service costs for the group of patients enrolled in the ACO. "That seems very high," says Sharp. "Pay-for-performance demonstration groups have struggled to get to 2%," he says.

A little more on risk: ACOs with fewer beneficiaries will have to achieve a higher savings rate than those with more. That's a problem, says Sharp.

"If we're really focused on drawing much of the system into value-based reimbursement, it seems essential to have it level across all markets--at least in the beginning--evolving toward a sliding scale in the future."

Another thing is that the savings rate is between 50-60% lower than the CMS's Physician Group Practice demonstration project, he says, which ended in 2010 after five years.

"Most organizations will look at that and cast a careful eye on evaluating the costs on the infrastructure side," he says doubtfully. "Is that enough to attract me to at least be having an opportunity to get some sort of return on the investment?"

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1 comments on "ACOs Generate High Interest, But Is Bar Set Too High?"


Mary Foarde (4/26/2011 at 4:36 PM)
It's more than just the risk that is going to make ACOs a hard sell. When you look at the sheer infrastructure requirements, it seems obvious to me that only large, "superstar" organizations will be able to afford to have the behemoth management structure that the regulations seem to require.