ACOs Take $4M of Startup Capital, Survey Finds

A new survey has found the average startup costs of accountable care organizations in the first 12 months of operation hit $2 million, but ACOs will likely need twice as much since any shared savings can take another year to flow.

The National Association of ACOs has released its National ACO Survey, which examines first-year startup costs and expected financial gains or losses after the first year of operation.

The survey was designed to capture information from the April 1, 2012, and July 1, 2012, CMS Medicare Shared Savings Program ACOs after they completed their first year of operation. Findings are based on responses from 35 ACOs that range from 5,100 to 78,000 assigned Medicare beneficiaries.

The average (mean) startup costs of ACO respondents in the first 12 months of operation totaled $2 million. Startup costs ranged from $300,000 to $6.7 million.

Since ACO savings flow slowly, due to the complexities of data collection and reconciliation, ACOs will have almost a second full year of operations until their cash flow is replenished from shared savings with CMS — if any, according to the survey. This means the average ACO will risk $3.5 million plus feasibility and pre-application costs.

"We estimate that in total, ACOs on average will need $4 million of startup capital until there is a chance for any recoupment from savings," according to the survey.

About one-third of surveyed ACOs anticipate breaking even after their first year. Nine ACOs estimated gains with the average being $1.3 million, whereas six estimated losses with an average loss of $1.3 million. (These estimates were made before the ACOs had received interim reconciliation numbers from CMS.)

More Articles on ACOs:

ACO Manifesto: 50 Things to Know About Accountable Care Organizations
It's Not Easy to Engage Patients — Even for ACOs
Survey: Number of Providers in ACOs Up 5% in 6 Months

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