ACOs Gaining Ground in Illinois

ACO is the hottest three-letter word in health care

Accountable care organizations take up only seven pages of the massive new health law yet have become one of the most talked about provisions. This latest model for delivering services offers doctors and hospitals financial incentives to provide good quality care to Medicare beneficiaries while keeping down costs. A cottage industry of consultants has sprung up to help even ordinary hospitals become the first ACOs on the block.

New Insurer-Hospital ACO Touts Early Success.

With only six months of data, the largest hospital system in Illinois, Advocate Health Care, and major health insurer Blue Cross Blue Shield of Illinois (BCBSIL) are declaring some early successes with its provider-payer accountable care organization, which is the largest commercial ACO, Scott Sarran, BCBSIL’s chief medical officer, said in a Kaiser Health Newsarticle.

Advocate Health Care based in Chicago and BLBSIL’s ACO called AdvocateCare has 250,000 PPO members and 125,000 HMO members, according to Sarran. In its first six months of 2011, the ACO resulted in hospital admissions per member dropping 10.6 percent, compared to 2010, and emergency department visits decreasing 5.4 percent, Kaiser Health News reported.

Even though the federal government offers under the 2010 health reform law a platform for Medicare ACOs, providers and payers have joined forces to create their own ACOs outside of the Medicare Shared Savings Program. For example, Hoag Memorial Hospital Presbyterian, Blue Shield of California and Greater Newport Physicians IPA just weeks ago announced its intent to create an accountable care initiative, and Pioneer ACO Atrius Health recently hinted in a FierceHealthcare interview that it is considering partnerships with commercial insurers, having already begun talks in reducing costs.

“If we’re doing this in the Medicare arena, why can’t we do this in the commercial environment, as well, and then be rewarded for the benefit we bring to the reduction in total expenses in Medicare PPO patients?” Atrius Health President and CEO Gene Lindsey said.

“Before, we were limited to the fee-for-service revenue that would be associated with caring for those patients. So this opens up a whole new vista in healthcare finance when we are looking for new ways to fully fund the programs of care that we want to offer,” he said.

The administration forming ACOs will take considerable effort and startup costs amounting to several millions of dollars according to:

What are ACO start up costs ?

That’s the”$64,000 question”

We have three separate estimates, with disparate figures.

The projected start-up costs of an accountable care organization (ACO) can vary widely, depending on who you talk to. The Centers for Medicare & Medicaid Services (CMS) estimates that it will take $1.7 million per ACO, based on a 2008 study of the Physician Group Practice Demonstration project, according to an Institute for Health Technology Transformation white paper released last week. The American Hospital Association (AHA), however, estimates ACO start-up costs are between $5.3 to $12 million, depending on hospital size. The Institute for Health Technology Transformation reports that it could take $7.5 to $11.3 million for a 200-bed hospital or $1 to $11.7 million for a 200-physician practice.