Scenario: Your hospital has an opportunity to participate with an Accountable Care Organization (ACO) contract with 20,000 ACO patients. The ACO patient population expects about 2,000 avoidable hospitalizations per year with a potential savings of $20 million, which will be shared 50% revenue to the insurer and 50% revenue to the hospital. The ACO patient population will require an average of 6 office visits per year, and 120,000 total office visits will need to be supplied by your primary care workforce.

To prepare for this Assignment: Based on the scenario and financial data provided by the course instructor, conduct a financial projection (revenues, expenses, and profit) which analyzes the efficiency in the supply of health services.

The Assignment: In a 2- to 3-page Word document that includes tables and/or calculations, make recommendations on the following: 1) number of physicians and nurse practitioners; 2) reimbursement method: salary or fee-for-service; 3) recommendations for financial incentives to address challenges of supplier induced demand and ensure efficiency. Interpret the net profit from the ACO contract based on your recommendations. Support your recommendations with rationale, including how the financial calculations impacted your recommendations.

Financial Data ACO revenue: Number of ACO patients 20,000 Potential savings: Number of avoidable hospitalizations per patient 0.1 Total avoidable hospitalizations per year 2,000 Cost per avoidable hospitalization $10,000 Total cost of avoidable hospitalizations $20,000,000 Demand for healthcare/utilization: Number of office visits per patient 6 Total office visits per year 120,000 Supply of workforce/expense: Employed providers (salary) Physician salary per year $200,000 Nurse practitioner salary per year $100,000 Contracted providers (fee-for-service) Physician fee per visit $100 Nurse practitioner fee per visit $50 Productivity: Physician visits per year 3,000 Nurse practitioner visits per year 2,000 Financial incentives: Salary bonus to ensure efficiency 10% Bonus fee per visit to ensure efficiency $1