The Per Patient Monthly Cost of Care Coordination for Accountable Care Organizations (ACOs)

by Peter McMenamin, PhD Senior Policy Fellow, American Nurses Association

In a prior posting, the Disease Management Care Blog noted that nurse-to-patient ratios in outpatient care coordination programs run between 1:750 to 1:1500. Based on 2010 Bureau of Labor Statistics data, the average annual salary of a registered nurse (RN) (in hospitals) is $68,610.  Fringe benefits for RNs add 46% for a total of $100,208.

Combine that ratio with the total compensation information and the per member per month (PMPM) cost for a care coordination nurse ranges from $5.57 to $11.13.
 
Obviously, a single RN does not care coordination make.  There are other overhead expenses, such as administration, documentation and supervision.  Assuming human resources account for the bulk of a program’s cost with an additional load of 25%, the total PMPM cost ranges goes from about $7 to $14, while 50% increases it to $8.35 to $16.70.

By my calculation, that puts monthly care coordination costs close to the CMS Innovation Center’s Comprehensive Primary Care Initiative (CPCi) within the “ballpark” of $15 to $20 per Medicare beneficiary per month (see page 3 here).
 
Based on these data:

1) CMS is being reasonable in offering a $20 monthly fee for care coordination.  It falls within industry benchmarks and supports a competitive compensation package for a typical RN.

2)  While CMS’ fee meets benchmarks, this is obviously meant to support a medical practice hiring additional personnel to take on the work of care coordination.  As a result, the fee may offer some additional margin depending on additional overhead.  Hopefully, the providers who participate in the initiative won’t assume that the $20 fee represents pure profit.  Expecting RNs currently on staff to manage care coordination on top of existing duties means that the existing duties or care coordination (and the RNs) will suffer.

3) As the Disease Management Care Blog pointed out in a prior post, this may also represent an argument for the “central” hiring and administration and the “peripheral” distribution of the care coordination nurses.  If administrative costs can be pooled and coordinated by a cluster of primary care sites, that could lower costs significantly.

4) Last but not least, this gives Accountable Care Organizations (ACOs) an important insight on one cost that they’ll need to take on if they are serious about care coordination.