Value-Based Care News

The Revenue Cycle Focused Accountable Care Organization

"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.”

By Jacqueline DiChiara

- Are you a healthcare provider considering making the accountable care switch as a New Year’s resolution? Staying in the black for 2016 means anticipating and preparing for possible financial disaster. But where should your revenue cycle management efforts be focused when it comes to starting your accountable care organization?

accountable care organizations revenue cycle management

ACO success stems from communication and assessment. Here are some suggestions according to advice collected from various corners of Xtelligent Media to help you get started. Or if you’ve already started, to help you better reassess where you are versus where you need to be.

Accepting risk requires financially dexterity

As anyone with an entrepreneurial spirit knows, you have to spend money to make money. There are initial costs associated with setting up accountable care goals.

Cost estimates vary depending on who you ask. Getting an ACO off the ground, according to 2014 estimates from the Centers for Medicare & Medicaid Services (CMS), costs $1.8 million. But other estimates, such as those from the American Hospital Association, surpass $26 million.

Average startup costs, according to another survey of 35 ACOS from the National Association of ACOs (NAACOS), within the first 12 months of operation were $2 million with a quite sizable range between $300,000 and $6.7 million.

"Since savings are slow to flow as result of data and complex reconciliation process, ACOs will have almost a second full year of operations until their cash flow can be replenished with shared savings from [the Centers for Medicare & Medicaid Serives] (if any),” confirms NAACOS.

“This means that the average ACO will risk $3.5 million plus any 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.”

Maybe the gamble is not really that bad after all

“Is the upside for participating in an ACO worth the investment? They used to say it would be less than $2 million to set up an ACO. They just said it's closer to $5 million – in some cases, $7 million if you've never been involved in risks,” said Paul Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis, to RevCycleIntelligence.com.

“If you step back from an ACO, it's a little like a primary care gatekeeper, largely driven by how strong your primary care model is. From the past, we know that creates anxiety from specialists who begin to figure they're going to be capitated.”

The most successful ACOs are delivering care at up to 40 percent below the standard cost of care, with high quality and patient satisfaction levels to boot, said Niyum Ghandi, Partner at Oliver Wyman, to RevCycleIntelligence.com.

“As the number of ACOs continues to increase, we’re seeing more small organizations begin to enter the various programs. Some of the earlier entrants into the Pioneer ACO program and MSSP were very large – with a few having over 100,000 Medicare beneficiaries.”

“ACOs have reached an important point in their evolution. … There are enough of them that they will be able to capture market share very quickly once they start demonstrating superior value.”

“[One] ACO that we’re aware of just finished their analysis of the first year of a number of new clinical models they deployed and the results are impressive. They were able to reduce total cost of care and avoidable utilization dramatically for several different high-risk populations through complete redesign of primary and specialty care.”

The most considerable cost may be tied to infrastructure improvements. Antiquated software certainly may not exactly be helping matters of revenue cycle.

According to Laura Beerman, Consulting & Policy Analysis Manager at Ascend Management Innovations, one simple strategy may be to consider hiring someone with direct expertise in accounting.

“We see actuarial firms working as consultants with ACOs because for the first time, the provider might be taking on risk, and they’ve got to maybe design or revamp what their incentive program looks like, or what their pay for performance structures will be,” says Beerman.

The good, the bad, and the uneventful

Perhaps the accountable care definition itself requires clarity.

“[The] most efficient long-term system is the capitated model, where there’s a finite amount allocated to the healthcare delivery system, which has to evolve to provide superb care with a predetermined fixed dollar amount per patient. ACOs are transitions from a pure fee-for-service model to a population management model,” stated Richard Slavin, MD, CEO of the Palo Alto Medical Foundation, to RevCycleIntelligence.com.

Some have seen successes with the Pioneer ACO model, for instance. CMS announced over $400 million in combined savings across 20 Pioneer and 333 MSSP ACOs last year. 97 ACOs qualified for shared savings of over $420 million.

“Many of these ACOs are demonstrating that they can deliver a higher level of coordinated care that leads to healthier people and smarter spending,” asserted Andy Slavitt, CMS’s Acting Administrator.

But others are struggling to stay financially afloat as the ACO trepidation smoke has yet to clear.

“There are some unusual features of the Pioneer ACO model, which are built into the way that performance is measured,” said Emily Brower, Vice President of Population Health at Atrius Health, to HealthITAnalytics.com.

“The Medicare fee schedule differs based on your geographical region. The difference between the prices in that region and the national average can help or hurt an ACO regardless of how it’s changing care. That does lead to some disappointing results for some participants.”

“There is also a threshold of savings that an ACO has to achieve before it shares in savings, and there are different options you can choose.”

“An organization that's very risk-averse might choose a higher threshold because that will protect them on the downside, and so they could generate savings but not return those savings to the ACO. Those are some of the issues that have shaped what we’ve seen this year and in past years.”

“We need to have a shared clinical goal and shared vision if we are to see success as an accountable care organization. So aligning and partnering with other components of the delivery system, developing common goals, and creating shared healthcare management programs is really important.”