The average ACO startup costs in the first 12 months is $2.0 million with a range from $300,000 to $6,700,000, according to recent NAACOS survey. The National Association of ACOs first national survey of the 2012 and 2013 Medicare ACOs reveals the average ACO start-up costs are higher than initially estimated by CMS, due to slow savings.
In fact, 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 (Yahoo Finance, 1/27).
“The high entry cost for ACOs, the unpredictability of outcomes and the long wait for payment of any savings, presents a difficult financial challenge,” said NAACOS CEO, Clif Gaus.
Other key findings include:
- ACOs on average will need $4 million of startup capital until there is a chance for any recoupment from savings.
- About 1/3 of the ACOs have assumed legal debt to finance their startup
- The range of predicted ACO gains and losses was expansive, with estimated gains as high as $9,000,000 and losses as much as $10,000,000. About one third (13) estimated a break-even level for the first year.
- The overall average for ACO internal costs was $413,000 and $443,000 for external vendor costs.
- The average ACO will spend a total of $850,000 for IT in the first 12 months of operation.
- Smaller ACO’s were less satisfied with their IT services.
The full report can be accessed at http://www.naacos.com/pdf/ACOSurveyFinal012114.pdf.
Survey Background
In November 2013 the National Association of ACOs conducted their first short web-based survey on:
- First year start-up costs
- Financial prospects for the first year of operation
- Operational problems launching the ACO
- Who processes CMS claims data (CCLF)
- Total Cost of internal and external IT services
- Satisfaction with IT services
This was designed to capture vital new information from the April 1, 2012 and July 1, 2012 CMS MSSP ACOs after they finished their first full year of operation. This survey is the first large scale examination of the actual first year start-up costs and IT spending experienced by ACOs. Spending on feasibility studies, CMS application, legal fees or other pre-contract costs were NOT included in the first year costs. There were 11 questions each requiring a multiple choice or text answers.
Thirty-five ACOs responded and were representative of the size and geographic distribution of the ACO population. Size ranged from 5,100 to 78,000 assigned Medicare beneficiaries.
