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For ACOs, IT Startup Costs Top $1 Million

Smaller accountable care organizations must pony up $1 million, larger ones $4 million, to get to the starting line, says Black Book report.

Ken Terry

September 27, 2012

3 Min Read

8 Accountable Care Organizations Worth Closer Examination

8 Accountable Care Organizations Worth Closer Examination

8 Accountable Care Organizations Worth Closer Examination (click image for larger view and for slideshow)

The data requirements for launching an accountable care organization will cost smaller ACOs more than $1 million and large ones up to $4 million before they start operations, according to a Black Book survey that included 300 developing and established ACOs.

The survey also reveals that 39% of ACO respondents plan to make most or all of their technology purchasing decisions before the third quarter of 2013.

Twenty-eight percent of providers participating in ACOs say they already have their basic health information exchange (HIE) and interoperability strategies in place. These providers will focus on community or regional exchanges for the foreseeable future, rather than national HIE initiatives, according to the report.

The 2012 Black Book IT Yearbook for ACOs, which also ranks the top software and service vendors for ACOs, surveyed leaders of 1,100 healthcare organizations. Among the hospital and healthcare system executives polled, 95% said that they were accelerating their acquisitions of HIEs, electronic health records (EHRs), clinical decision support, care coordination, business intelligence, and complex revenue cycle management systems to prepare for ACOs and other care delivery models pegged to new methods of reimbursements.

More than half of hospital and payer executives agreed that the return on investment in health IT for ACOs and patient-centered medical homes would be determined within the first two years of successful operations.

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Among the ACOs that Black Book surveyed in 46 states, hospital systems sponsored 168, physician groups 91, insurers 38, and community-based groups four. By comparison, a Leavitt Partners survey conducted last April found that hospitals sponsored 118 ACOs; physicians 70; insurers 29; and community-based organizations four. Leavitt Partners noted that the number of physician-led ACOs was growing rapidly, while the hospital-led ACOs were leveling off.

Doug Hires, executive VP of Santa Rosa Consulting, told InformationWeek Healthcare that the Black Book respondents' estimates of how much it would cost to build an ACO IT infrastructure are probably in the ballpark. "It could be that much or significantly more," depending on whether an ACO is in a rural or an urban market, he said.

But smaller, physician-led ACOs probably won't have much trouble raising the requisite capital, he said, because they can get the funds from hospitals or payers.

The very high percentage of providers that are already acquiring pieces of the IT systems they'll need for ACOs, according to the Black Book, is far higher than the percentage of hospitals that have said they're part of an ACO or planning to form one. But this didn't surprise Hires.

"The clients we're working with are convinced that we will be moving away from fee for service," he pointed out. "Many of the larger academic medical centers and integrated networks have already taken steps to move away from fee for service to value-based reimbursement and performance-based contracts. So those arrangements are already starting."

Hires admitted that physicians are not as progressive as hospitals and payers in this respect. However, he pointed to the continued migration of physicians into hospital employment across the country as evidence that many doctors realize "they're going to have to partner up."

About the Author(s)

Ken Terry


Ken Terry is a freelance healthcare writer, specializing in health IT. A former technology editor of Medical Economics Magazine, he is also the author of the book Rx For Healthcare Reform.

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