Your hospital has an opportunity to participate with an Accountable Care Organization (ACO) contract with 50,000 ACO patients. The ACO patient population expects about 5,000 avoidable hospitalizations per year with a potential savings of $50 million, which will be shared as follows: 50% revenue to the insurer and 50% revenue to the hospital. The ACO patient population will require an average of six office visits per year, and 300,000 total office visits will need to be supplied by your primary care workforce.

Financial Data ACO revenue:

Number of ACO patients 50,000 Potential savings:

Number of avoidable hospitalizations per patient 0.1

Total avoidable hospitalizations per year 5,000

Cost per avoidable hospitalization $10,000

Total cost of avoidable hospitalizations $50,000,000

Demand for healthcare/utilization:

Number of office visits per patient 6

Total office visits per year 300,000

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