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First crop of Medicare ACOs navigate data problems

A survey of Medicare ACOs after their first year in operations suggests that all parties, government and private sector health organizations, have improvements to make in the coming years, especially when it comes to sharing data.

The National Association of Accountable Care Organizations (NAACOS) surveyed health organizations in 35 of the first generation of Medicare shared savings ACOs that started in 2012. Querying them on their startup costs, estimated savings and biggest challenges, NAACOS concluded that the picture is likely to be mixed when full data on savings and performance comes in.

Startup costs averaged $2 million per ACO--higher than the Centers for Medicare & Medicaid Services estimated, but lower than others predicted, said NAACOS CEO Clif Gaus.

With a range of $300,000 to more than $6 million, the upfront investments participating organizations made "is a strong statement about the high level of risk an ACO is willing to take in order to transform care in their community," Gaus, the former chief administrative officer at WellPoint, said in the report.

ACO participating organizations are making those investments on the hypothesis that in the long-run they'll help coordinate care that, in turn, leads to avoided readmissions and duplicative testing and in general better patient experiences, all of which should leave savings to be shared by the providers and federal taxpayers.

Many of the shared savings ACOs will have to continue those investments, though, or not see any returns on them for at least a year after starting. "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," Gaus wrote in the report.

For the first crop of shared savings ACOs, a number of problems marked their early work, NAACOS survey found, with "the overwhelming number of responses" related to CMS data and "learning to access it and process it."

Among specific problems, health organizations mentioned: "finding suitable software," "meeting implementation schedules," "delays in getting claims data," "new skill sets to analyze data," "addresses of assignees," "slow stand-up of IT system,""data inconsistency from CMS," and "translating the data into actionable information for care managers and providers."

Those problems may partly be related to IT management, much of which has been outsourced. About a quarter of the ACOs surveyed managed claims data using internal IT, about a quarter used only an external vendor and the rest used a combination.

Overall the ACO organizations rated their IT satisfaction at 6.4 on a 10 point scale, with those using wholly outsourced IT reporting more satisfaction on average and smaller ACOs reporting somewhat less.

As for savings, CMS is currently providing interim results to the ACOs that started in April and July of 2012, before making them public. But NAACOS asked the ACOs for estimates--and found an "expansive" range of predicted gains and losses.

Some are expecting gains of as much as $9 million in the first year and some are expecting losses of as much as $10 million, with about one-third expecting to break even. In total, nine anticipate gains of $1.3 million on average and six anticipate loses average about as much; six didn't have enough information to make a guess.

Based on the early day, Gaus said, "the high entry cost for ACOs, the unpredictability of outcomes and the long wait for payment of any savings, presents a difficult financial challenge."

Gaus estimates that the average shared savings ACO is risking is $3.5 million, plus feasibility and pre-application costs, until it can get "cash flow relief" from possible savings. At least one-third of the ACOs took out legal debt to finance their venture, he noted--so many are certainly banking on recouping investment costs.

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