First National ACO Survey on Startup Costs

WASHINGTON, Jan. 27, 2014 /PRNewswire/ -- The National Association of ACOs (NAACOS) announces the results of their first national survey of the 2012 and 2013 Medicare ACOs. The survey was designed to capture vital new information from ACOs participating in the Medicare Shared Savings Program (MSSP) after they finished their first full year of operation. It is the first large scale examination of the actual first year start-up costs and IT spending experienced by ACOs. Startup costs included internal administrative and clinical improvement staff as well as contract costs, but not feasibility studies, CMS application, or pre-application legal fees. The NAACOS survey reports the average first year startup costs to be $2.0 million. These are higher than estimated by CMS but considerably lower than many other estimates. NAACOS CEO, Clif Gaus, stated "the average start-up cost per ACO of $2,000,000 is a strong statement about the high level of risk an ACO is willing to take in order to transform care in their community."

Since savings are slow to flow as result of data and complex reconciliation process, ACOs will have to assume the risk of almost a second full year of operations until their cash flow can be replenished with shared savings from CMS (if any). This means that the average ACO will risk $3.5 million plus any feasibility and pre-application costs until it can see any cash flow relief from possible savings. We did not obtain detail on the source of funds but know that about 1/3 of the ACOs have assumed legal debt to finance their startup. NAACOS CEO, Clif Gaus, commented that "the high entry cost for ACOs, the unpredictability of outcomes and the long wait for payment of any savings, presents a difficult financial challenge."

The survey also examined Information Technology practices and costs in the ACOs and found that most ACOs use a mix of internal and external resources and spend about equal amount for each. A small minority of ACOs either conduct their IT exclusively with internal or external resources. The average ACO will spend a total of $850,000 for IT in the first 12 months of operation with costs varying by size. Finally, smaller ACOs were less satisfied than larger ACOs with their IT services.

The full report can be accessed at www.naacos.com.

SOURCE National Association of ACOs