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Accountable Care Organizations Will Fail !


Stanley Feld M.D.,FACP,MACE

The more I study ACOs the worse they look. Dr. Berwick’s goal is redistribution of wealth. This is exactly what ACOs are going to do. Patients, taxpayers and physicians are going to get the short end of the distribution.

Hospital systems are spending a ton of money trying to form ACOs. They are going to lose big. I have concentrated on the obvious defects and difficulties in forming ACOs in the past. Here are some more traps.

I don’t think anyone has considered the following,

  1. Which consumers will ACOs treat?

Only Medicare patients are included in the ACO program for now. Medicaid and private insurance patients are not included. Medicaid will have a severe physician shortage with increasing enrollees. The result will be greater cost shifting in the private sector. The private sector will disappear. 

     2. How many Medicare patients will be covered?

“ACOs will only care for 1.5-4 million beneficiaries” As of 2001 there were 35 million Medicare seniors and 5 million persons on Medicare disability. The number is estimated to grow the 72 million by 2030.

      3. How will the government decide on reimbursement to the individual ACOs?

Unknown. There have already been indications that the government will individualize ACO reimbursement.

     4. What are the criteria to determine under utilizing or over utilizing ACOs? 

Unknown. Under utilizers are supposed to share the difference 50 /50 or 60/40 with the government and over utilizers will pay the government the difference.

Different ACOs approved can develop different models of organization and payment structures for care as long as it meets the budget and quality goals the government determines.

The government’s thinking is that decentralized accountability and leadership with (monetary) sticks and carrots are likely to produce better results for the whole country than central government rules without the ability to enforce the rules. 

 ACOs which incur too high a utilization or which do not meet the quality targets, may have to forgo reimbursements completely (see patients for nothing) or even pay CMS money back. CMS has placed its emphasis on ACOs beating the reimbursement goals. The government would then share the savings with the ACO. In either case the government wins.

A frightening thought is ACOs can become too big to fail. It would necessitate another government bailout. You can be sure within 456 pages of the rules there are many unintended consequences. There are also ways to beat the system that will be discovered in the future. 

Once again, CMS, HHS and President Obama are trying to fool us with numbers.

CMS hopes that ACOs could save it $170-960 million over three years.” The Medicare and Medicaid budget for three years is $1.8 trillion with Medicare consuming most of the money. The “cost savings” represent only 0.01%- 0.05% of the Medicare budget.  This is a tiny savings.

Can anyone be impressed with the potential cost savings? One should be impressed with how the savings is presented by the administration and how much bureaucracy it will take to set up and implement the system.

The performance measurements (or standardized “metrics”) have not been defined for ACOs. Performance measurements discussed so far have been process measurements. Process measurements do not necessarily lead to better medical or financial outcomes. These process measurements are just a surrogate that assumes better outcomes.

The fact that if an ACO or its physicians do four HbA1c tests per year for the management of Diabetes Mellitus, it does not mean that the medical and financial outcomes will improve. This defect in process measurements applies to many chronic diseases.  The management of chronic diseases and their complication account for 80% of the healthcare dollars spent. 

ACOs must have a minimum size of 5,000 “ Medicare ensured lives”. This is not possible with small practices. The net margin is too small for Medicare to overload a small group practice with 5,00 Medicare patients at present rates of reimbursement. Reimbursement is projected to become even smaller.

CMS has already picked the groups (identified by Dr. Don Berwick’s Institute for Healthcare Improvement) who will qualify for ACOs. They are supposedly low cost/high quality groups. The goal is to create ACOs with integrated healthcare systems who salary physicians. Physicians in those organizations are supposedly used to working closely together. There should be an emphasis on primary care physicians.  The government will then let the hospital systems and physicians fight over dividing the government reimbursement.

 ACOs are not for everyone. If the ACO is fragmented, with weak physician leadership and high usage of independent specialists, it will difficult to have a high-performing ACO. Even if an ACO is low cost and high quality it will be difficult to be profitable as reimbursement is decreased. If Medicaid is added to the scheme hospital systems will fail

The only advantage is that the ACO might be too big to fail. The government will be forced to bail them out.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.








  • Dan

    I think that the ACOs are designed to fail and here is why. ACOs are similar to the PPOs of the 1980s and 90s in which physician groups were formed to “accept risk” from the insurance companies with the hope of a monetary reward and many went bankrupt. Accepting risk makes the physician group whether a PPO or ACO the defacto insurance company. The reason they fail is because the physician can not be both the patient advocate and the insurance company denier of care. If the physician group(ACO) denies care they will be sued and go bankrupt. If the ACO doesn’t deny care they will be penalized for overspending and also go bankrupt.
    When they go bankrupt the government will bail them out, but will take over all their assets, nationalizing the system a piece at a time. A private system will then not be allowed or able to reconstitute. That in my humble opinion is the end game.

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The Accountable Care Organizations (ACOs) Plot Thickens.

 Stanley Feld M.D., FACP, MACE

Thousands of articles have been written about forming ACOs. Millions of dollars have been spent by hospital systems to try to form an ACO. Healthcare policy consultants have discovered a new cash cow.

Hospitals systems are wasting their money. They think the return from owning salaried physicians’ intellectual property will be more than worth the cost.

  1. Thousands of physicians have been confused by the concept of ACO.
  2. Many have felt ACOs are an attack on their freedom to practice medicine the best they can.
  3. Many have rejected the concept because they feel they will have to be salaried by hospital systems.
  4. Many physicians do not trust President Obama or Dr. Don Berwick.
  5. The Stage 2 ACO regulations are not easy to understand. They are more ominous than the stage 1 regulations.

The two core stated objectives for ACOs are:

(1) Reducin healthcare costs.

(2) Preserving and improving quality. 

The stated objectives are laudable. The government regulations and controls are confusing. They are a threat to physician autonomy. There are many unwritten rules pending. Physicians are being asked to accept the unwritten rules on blind faith and trust them.

ACO requirements are;

 1.     Agrees to participate for three years.

2.     Cares for 5,000 Medicare patients

 3.     Is prepared to receive and distribute shared savings.

4.     Is prepared to repay shared losses (if it takes economic risk).

5.     Establishes reporting, and ensures ACO participant and ACO provider/supplier compliance with program requirements, including the quality performance standards.

6.     Has shared governance that provides all ACO participants proportionate control over the ACO’s decision making process and includes Medicare patient representatives.

7.     Is operated and directed by Medicare-enrolled entities that directly provide health care services to Medicare patients. ACO participants (e.g. physicians, hospitals) must have at least 75 percent control of the ACO’s governing body.

8.     Has sufficient primary care physicians to meet the primary care needs of the ACO patients.

9.     Has administrative and clinical organization and leadership.

10.  Is patient-centered though the use of such things as patient assessments and individualized care plans

11.  Is subject to substantial monitoring and reporting requirements, including public reporting of quality data to ensure transparency.

The rules get complicated. They will be difficult to execute and enforce.


Those who can participate include,

  • Group medical practices
  • Networks of group practices (e.g. IPAs)
  • Partnerships of joint ventures between hospitals and physicians (e.g. PHOs)
  • Hospitals employing physicians
  • Anything else that accomplishes the objectives of the Act

Group practices are placed at the top of the list intentionally. It is to decrease physicians’ anxiety and sense of losing control.

 The only way ACOs have a small chance of succeeding is if physicians are hired by the hospital systems and the hospital systems divide the money. The fight will then be between hospital systems and their physicians.

Two questions immediately come to mind:

  1. How is the calculation done to divide the money by the hospital system? What money is taken off the top for hospital systems’ salaries and expenses before the savings is shared with physicians?
  2. If there is a loss rather than a cost saving, and the government reduces the ACO’s compensation, how is the distribution of the loss calculated? Let us say four physicians in the system were responsible for 90% of the loss.  Should everyone be responsible? I do not think any of this has been thought out.

The legal issues involved with ACO’s are vast and expensive. One issue revolves around the Stark law and the anti -kickback statutes in the law. How can an ACO participate in the proposed Medicare Shared Savings and not violate the Stark law provisions? Easily say the OIG and CMS. They will issue waivers from the Stark law. The implication is these agencies will bypass congress once more. 

The provisions listed to get an anti-kickback waiver are complicated. It will require expensive compliance. There will be issues which will require expensive legal action by the hospital systems and physicians as a result of a net decrease in reimbursement.

“Conceptually speaking, DOJ has publically stated that they will seek to support organizations which accomplish the law’s two core objectives—lower cost and improve quality. More specifically, DOJ has said “[they] will not challenge an ACO that otherwise meets the CMS criteria to participate in the Shared Savings Program if ACO participants that provide the same service (common service) have a combined share of 30 percent or less of each common service in each ACO participant’s Primary Service Area (PSA), wherever two or more ACO participants provide that service to patients from that PSA.”

 Does anyone understand this? It gets worse.

 “DOJ have even allowed for the possibility of ACOs where the combined PSA share would exceed 30 percent in saying “an ACO outside the Safety Zone may proceed without scrutiny by the Antitrust Agencies if its combined PSA share for each common service, wherever two or more ACO participants provide that service to patients from that PSA, is less than or equal to 50 percent. An ACO in this category is also highly unlikely to present competitive concerns if it avoids certain specified conduct.”

As we get further into the weeds the Stage 2 ACO regulations become even more confusing.

“The Justice Department has stated that they will use the more malleable “rule of reason” analysis when reviewing ACOs. The Antitrust Policy Statement explains, however, that for ACOs that do not meet the Rural Exception, a combined PSA share for common services of more than 50 percent provides a valuable indication of an ACO’s potential for competitive harm.” DOJ is proposing an expedited review process for ACOs; and we can expect many ACOs to line up for the review process.”

My reflex is that you have to trust that President Obama will do the right thing for physicians and their patients.

You also have to trust that the hospital systems that salary physicians will be looking out for their physicians and not themselves while owning physicians’ skills and intellectual property.

It will be a very difficult task!

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.








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Another Big Idea

Stanley Feld M.D.,FACP,MACE

President Obama refuses to listen to this big idea. He is not focused on the real problems in the healthcare system.

A healthcare cost saving of at least $800 billion dollars a year would occur if the complications of chronic disease could be decreased by 50%.  It could occur if he concentrated on changing the culture from medicine’s job is to fix disease to society’s job is to prevent disease. Patients must also learn to be responsible for the self-management of their chronic disease.

The healthcare system is dysfunctional. President Obama’s Healthcare Reform Act will not fix this dysfunction. It is making it worse. He is ignoring many of the real causes of the inefficiencies in the healthcare system. 

The question is who is at fault? All the stakeholders are at fault. The stakeholders are the healthcare insurance industry, the government, the hospital systems, the physicians and most importantly, the patients.

President Obama is ignoring the patient’s role and responsibility in the inefficiency of the healthcare system. He is focusing exclusively on the physician’s role.

Once President Obama is successful in making medical care a commodity the patient-physician relationship will be destroyed. The patient –physician relationship accounts for a large part of the therapeutic effect of a treatment.

The primary stakeholders are patients with physicians. Without patients or physicians we would not have a healthcare system. Healthcare insurance companies, the government, and hospitals are secondary stakeholders. President Obama focus will increase the benefits of the healthcare system to the secondary stakeholders and not to patients.

The healthcare insurance industry has turned out to be the biggest villain . It has taken advantage of the dysfunction of the government and weakness of patients and physicians as lobbying groups. The healthcare industry takes sixty cents out of every healthcare dollar spent by Medicare, Medicaid and private insurance. President Obama’s Healthcare Reform Act’s rules and regulations do not deal with the healthcare industry control over these healthcare dollars.  It has yielded to every demand by the healthcare insurance industry.

The healthcare insurance industry is abusing its power. It has manipulated congress and the administration to serve its own vested interest.

The result is grotesque salaries for executives and excessive administrative fees. Our healthcare system is supposed to be for the benefit of the consumers (patients), not for the benefit of the healthcare insurance industry.

The healthcare industry has restricted access to care. It has decreased physicians’ reimbursement and withheld payments for services rendered without explanation or justification.

The government outsources the administration of Medicare and Medicaid to the healthcare insurance industry.  

There are many examples of healthcare insurance industry abuse of the healthcare system. Medicare Part D provides an excellent example. Medicare Part D fees for 2011 increased once again with the consent of the government. These new fees are abusive to seniors. It is difficult to understand why government regulars do not defend seniors.

Seniors on fixed incomes need a reliable drug coverage plan. The healthcare insurance industry lobbied for four years to get a drug plan passed that would be to its advantage at the expense of the government and seniors.

The government subsidizes Medicare Part D. Yet the government cannot negotiate drug prices. The abuses are the result of high deductibles and a doughnut hole that does not provide drug coverage between $2,700 and $5200 dollar spent. Prices are rigged so a patient can find himself in the doughnut hole in a hurry.

Humana and United Healthcare rushed to insure seniors under Medicare Part D. They visualized the money making opportunity quicker than most of the other healthcare insurance companies.

Both companies also realized that as healthcare insurance premiums increased in the private sector there would be more uninsured consumers. The less lives covered the lower its profit. Therefore a drug plan leveraged in their favor sponsored by the government would cover the decrease in profit in the private sector.

United Healthcare paid AARP over 4 billion dollars to be their exclusive carrier for AARP senior members. There is no shortage of complaining from AARP’s seniors. The payment to AARP for sponsorship has not been fully disclosed nor its ethics been investigated.

United Healthcare made a profit of $4.7 billion dollars last year from Medicare Part D at patients at the government’s expense. Despite this enormous profit the Medicare regulator have permitted United Healthcare to increase the premiums each of the last five years.  

On careful analysis seniors are being ripped off. In response seniors have flocked to Wal-Mart and others to buy $4.00 per month generics drugs. They pay cash and avoid using brand name drugs. Their goal is to avoid the Medicare Part D doughnut.

If seniors used Medicare Part D, their co-pay would be $6.00 for a month’s supply of medication rather the $4.00 paying cash at Wal-Mart. The doughnut could be charged between $20 and $50.  The healthcare insurance company would probably only pay Wal-Mart $4.00. None of these price manipulations are transparent or restricted. Seniors are the losers.

Medicare Part D is a good place to start to understand the abuse of this non-transparent system. President Obama is making a big deal of his token changes to Medicare Part D. His changes are not significant.

Similar abuses occur with government outsourcing Medicare Part A and B.

There is a tremendous waste of government and consumer resources. Real price transparency is essential if there is going to be any progress in reducing the cost of the healthcare system.

What do I mean by real price transparency? It means knowing,

  1. The cost of the drug to the pharmacy.
  2. The cost of the drug to the healthcare insurance company.
  3. The price of the drug calculated toward the doughnut.
  4. The government subsidy for the cost of the drug to the healthcare insurance industry for administration of the program.
  5. The profit for the healthcare insurance industry.

If real price transparency occurred, we would be able to have a competitive pricing system.

The administration is busy penalizing patients with decreased access to care and physicians with decreased reimbursement to decrease healthcare costs. It should focus on the real villain in the healthcare system, the healthcare insurance industry.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.



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A Big Idea For President Obama

Stanley Feld M.D.,FACP,MACE

President Obama has been disingenuous during his entire time in office.  He has publicly asked for ideas on Repairing The Healthcare System before and after he took office. I will repeat the advice that he has ignored in the next few blog post.  

He has been influenced by the ideas of Tom Daschle and Don Berwick to the exclusions of ideas that might actually be effective. Both men are convinced that the healthcare system would be repaired if there were a complete government take over.

President Obama has been extremely cunning in working his way toward a complete government takeover of medicine. Some of Mr. Daschle and Dr. Berwick’s ideas are good. Most of their ideas will not fix the defects in the healthcare system. There is a total disregard of citizens in their program.  

President Obama is expanding the bureaucracy and creating a wasteful morass of new agencies. Those agencies are generating incomprehensible and non-enforceable regulations. The regulations are trying to commoditize medical care  in America. 

Our healthcare system is a mess. Medicare and social security in its present form will result in a 100 trillion dollar a year deficit in 75 years. The solution to Repairing the Healthcare System is relatively simple. The key to the solution is social responsibility by all stakeholders involved in the healthcare system and individual responsibility by the consumers and potential consumers of healthcare.

Neither political party is getting behind a big idea that’s bold enough to actually solve major problems.  

Unfortunately, secondary stakeholders (the healthcare insurance industry, hospital systems and government) have not become socially responsible toward the best interests of consumers. Consumers will assume responsibility with significant incentives and appropriate education.

 One big idea is to reform the food industry. The food industry’s products and advertising undermine Americans eating healthy. The food industry’s advertising has to be redirected to consumer education and not consumer self-destruction.  President Obama’s approach to healthy eating has been tokenism.

He has ignored appropriate input on how to fix the food industry in an effort to decrease obesity in America.

  No one has asked for the opinion of practicing physicians. The focus of all healthcare policy “experts” is economics.

Here is a big idea.

Obesity leads to chronic diseases such as Type 2 Diabetes Mellitus. Walk into any Coronary Care Unit in the nation and 80% of the patients with myocardial infarctions are obese and have Diabetes Mellitus. The complications of Diabetes Mellitus cost the healthcare system $160 billion dollars a year. Eliminating obesity will reduce the incidence of Diabetes Mellitus by at least 50%.

Cheap manufactured food subsided by the government results in 19% of America’s fossil fuel use. It also results in more than 75% of the obesity in this country.

Eighty per cent of the healthcare dollars are spent on the complications of chronic diseases. The eighty percent cost to the healthcare system is one trillion six hundred million dollars a year.

The obesity epidemic is interconnected with our energy policy and energy subsidies, farm policies and subsidies, environmental policy and conditioned attitudes toward fast food.

 Michael Pollan points out the problem with our entire food supply system and the impact it has on healthcare, the environment and energy.

“Which brings me to the deeper reason you will need not simply to address food prices but to make the reform of the entire food system one of the highest priorities of your administration: unless you do, you will not be able to make significant progress on the health care crisis, energy independence or climate change

The three problems are tightly connected. The repair of each problem has to must be done in a creative way that aligns all the stakeholders’ incentives with consumers’ health and wellness.

Michael Pollen goes on to tell President Obama “Unlike food, these are issues you did campaign on — but as you try to address them you will quickly discover that the way we currently grow, process and eat food in America goes to the heart of all three problems and will have to change if we hope to solve them.

Mr. Pollan’s point is the way we grow food and manufacture food stuff is a major reason for obesity and pollution leading to the complications of chronic diseases (Type 2 Diabetes Mellitus and chronic lung disease). This results in a 1.6 trillion dollar cost to the healthcare system. All American’s needs is the will to change.  

It is going to require a lot of public and congressional education. It will be harder to educate congress than the public. Vested interest lobbying drives Congress.  President Obama must help the public create a greater voice than the special interests. The public will then lobby the congress.

Michael Pollan says “the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases.  

The reformatting of the payment system for physicians with the theoretical effectiveness of Accountable Care Organizations (ACO’s) will not work. It will only waste money. It will only dispirit the medical profession and diminish the effectiveness of a necessary workforce. Physicians are not the villains.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.



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The Will Of The People


Stanley Feld M.D.,FACP,MACE 

I have struggled to understand why President Obama is ignoring the will of the people. I have also struggled to understand why the traditional media ignores the important stories.

The media deals with the day’s murders, tragedies and traffic accidents in exhausting details. Important stories are covered and dismissed with meaningless sound bites.

Americans are interested in learning the story beneath the sound bites. This is the reason traditional newspapers are failing. Its old business model doesn’t work any more.   

Americans want affordable high quality healthcare available to everyone. Most Americans are charitable and hard working. They want to help the unfortunate.  They are sick of entitlements and their wasteful costs. They do not want a system that discourages hard work and responsibility.

President Obama is expanding healthcare entitlements while totally disregarding the fiscal responsibility of the federal and state governments. 

He continues to use fuzzy math to blur the resulting increases in deficits.  

The entrepreneurial spirit in Americans is the spirit that has made America great. President Obama’s policies are going to destroy this spirit.   

This week a reader wrote:

“Hi Dr. Feld

I’m using my soon to be published book to organize America.  Do you think your son Brad would be interested in setting up a website that helps “defund” the political parties by coalescing average Americans who are tired of the lies to send a dollar to candidates who are not from the establishment of either party?

Until we can get people organized using the internet to change the people in DC, we lose.  It’s all about the money.  1% of America, giving 1 dollar each can send a new face to Congress.  We can do it! we must do it!”

I sent the message to Brad.  On the surface Brad’s reply is straightforward. No is no! To me it has deeper meaning.   

“I'm not really interested in engaging in this. I'm drifting further away from politics every day as I don't think you can easily fix the macro through surgical strikes.”

I have often been asked why, as a retired endocrinologist, I display so much passion for repairing the healthcare system.

During my thirty years in practice I lived through the destruction of our healthcare system. Our government has had its heart in the right place but always seemed to do things to the disadvantage of the two principle stakeholders, patients and physicians. These two stakeholders are the most disorganized and least politically powerful of all the stakeholders involved in the healthcare system.

President Obama either doesn’t have a clue to the problems in the healthcare system or doesn’t care what patients or physicians think. He is either naïve or married to untested theoretical concepts. President Obama is going to destroy our healthcare system and replace it with a bureaucratic system that will make medical care mediocre for all. The federal government cannot afford the cost of his “new healthcare system.”

There is also a big ideological issue. President Obama believes the government needs to do everything for the people. The opposite argument is Americans need to do everything for themselves. The government’s job should be to level the playing field among stakeholders.

Patients and physicians want independence and personal responsibility. President Obama is not listening to the people. 

Kris Kristofferson is one of the great popular poets of our time. His song “To Beat The Devil” has been the inspiration for my blog. My goal is to educate the public beyond the typical sound bite. 

If you waste your time a-talking to the people who don’t listen
To the things that you are saying who do you think’s going to hear? 
And if you should die explaining how the things that they complain about
Are things they could be changing, who d’you think’s goin’ to care? 

There were other lonely singers in a world turned deaf and blind who
Were crucified for what they tried to show,
And their voices have been scattered by the swirling winds of time,

‘Cause the truth remains that no-one wants to know!

When no-one stood behind me but my shadow on the floor and lonesome was more
Than a state of mind. You see, the devil haunts a hungry man; if you
Don’t want to join him you’ve got to beat him. I ain’t sayin’ I beat the
Devil, but I drank his beer for nothing, and then I stole his song!


And you still can hear me singing to the people who don’t listen
To the things that I am saying, praying someone’s going to hear;
And I guess I’ll die explaining how the things that they complain about
Are things they could be changing, hoping someone’s goin’ to care.

I was born a lonely singer and I’m bound to die the same
But I’ve got to feed the hunger in my soul;



The reader of my blog I quoted is yearning to use the new media to educate and organize the public to say no to the politicians who seem to do everything they can to screw up things the public is complaining about and has no interest in hearing their complaints or eliminating them.


On the other hand Brad is saying surgical strikes to the political process does not change things in our society. Innovations by entrepreneurs change things. This is the deeper meaning of Brad's comment.

We are going through an electronic revolution. Jeff Bezo with and the Kindle revolutionized the book publishing business. Google revolutionized the information business. Steve Jobs did the same for the communications and information business with the IPhone and the IPad. Netflix is revolutionizing the movie and television business. Think about the power of Twitter and Facebook. Social networking is in its infancy. It continually gets bad press because of its threat to the traditional media and political power.

These innovations are revolutionary. They will empower citizens to be a deterrent to politicians’ power. They will not be able to limit our freedom of choice. 

Petty political arguments about decreasing the budget by $3 billion vs. $38 billion dollars are silly. Americans are not stupid. This debate is not newsworthy.  Our deficit is over $1 trillion dollars a year. Government spending has not stimulated our economy. It has not increased our standard of living. Both political parties are lost in translation.

“President Obama believes that prosperity begins inside someone's head in Washington and then flows out to the country”

Most Americans disagree.

We need leadership that believes in innovation and entrepreneurship. Leaders should understand that prosperity is born inside the head of several hundred million citizens. 

he opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

















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The Federal Government and Accountable Care Organizations (ACOs)


Stanley Feld M.D.,FACP,MACE

In 2009 President Obama stated that Accountable Care Organizations (ACOs) were going to be pilot programs in real world settings. The goal was to see if they effective in reducing costs and increasing “quality of care.” The results of the pilot programs have not been published.

Last week despite the lack of proof of concept HHS and CMS announced new proposed regulations for ACOs.

The new delivery and payment model the agency estimates could serve up to 5 million Medicare beneficiaries through participating providers, and also potentially save the Medicare program as much as $960 million over three years. 

How were these estimates derived? It could be another accounting  trick by President Obama’s administration.

The idea of coordinating care and developing systems of care is a great idea theoretically. From a practical standpoint, execution is very difficult.

I tried to execute something similar in 1996 with the American Association of Clinical Endocrinologists; a national Independent Practice Association. AACECare received little cooperation or interest from Clinical Endocrinologists. 

The problem is coordinated medical care is dependent on physicians cooperating and not competing with each other.  It also depends on  hospital systems developing an equitable partnership with physicians.

The equitable partnerships between hospital systems and physicians are difficult to achieve if past results are any indication of future results.

 An important element to the success of ACOs is patients’ use or abuse of the ACO. There are no incentives provided for patients to manage their chronic diseases and avoid complication of those diseases. 

Some of the problems with Dr. Don Berwick’s rules and regulations for ACO’s are:

1.Patient compliance is not considered in the system. Positive outcomes and savings are mostly dependent on patient behaviors and compliance with treatment.

2. ACOs are dependent on hospital systems developing a network of physicians who cooperate to coordinate care.

3. Cooperation between physician and hospital systems depends on mutual trust. The hospital systems will receive and distribute the money received from the government. This is an area ripe for conflict and mistrust.

4. Dr. Berwick does not calculate the role of patients in risk management of their chronic disease.  Patients are the drivers of their medical outcomes.

5. One Medicare and Medicaid check would go to the hospital system to be distributed to physicians. The administration of the ACOs would determine the distribution. This will result in great conflict. The trust issue must be resolved from the onset.

6. Physicians are uncomfortable working for organizations who determine the value of their intellectual property or surgical skills. 

 ACOs’ will have to develop systems to dictate care consistent with government determined evidence based medicine. The government will reward organizations that are successful. It will penalize organizations with poor outcomes. The hope is to increase quality of care and decrease the cost of care.

 The execution will be difficult. In reality ACOs are HMOs on steroids.

The proposed payment formula is difficult to follow. It must be understood in order to appreciate the defects in the system. 

1. Hospital systems will own and control physicians’ intellectual property.

2. Hospital systems’ political decision process will determine pay and distribution. 

3. The federal government will determine what it will to pay the ACOs. This is a major defect given the federal government past behavior in judging the value of physicians intellectual property and surgical skills. As a reason of budget pressure the federal government will be forced to decrease reimbursement.

4. It will be the ACO’s responsibility to come in under budget. If the ACOs come in under budget the excess will be shared 50/50 between the government and the ACOs.

5. Each ACO will have an individual budget based on patient demographics and risk weighting. Risk weight is an imperfect science.

6. ACOs must define the processes it uses to coordinate care. CMS rules outline a range of strategies for ACOs to accomplish this. The processes included must be;

             a. Predictive modeling.

             b. Use of case managers in primary-care offices.

             c. Use of a specific transition-of-care program that includes clear guidance and instructions for patients, their families and their caregivers;

             d. Remote monitoring.

             e. Telehealth.

If any of these processes are lacking or defective in the government’s judgment the ACO will not be eligible to save in any savings.

The payment system is equally frightening under the proposed regulations:

1.ACOs would provide an organization with a separate tax identification number. 

2. Payments would go directly to the ACO’s administration. The ACOs administration would decide on the distribution of those payments to its member providers.

3. The ACO rules would allow ACOs to receive shared savings if they meet both the quality performance standards established by the HHS secretary and their target spending goals.

4.The target spending goals would be set for each ACO by HHS.

5.HHS can also limit or adjust the total amount of shared savings paid to an ACO.

 6. There will be no administrative or judicial review process for determining ACO's eligibility for shared savings. There is no review process for “termination of an ACO” for failing to meet quality performance standards.

7. ACOs can participate under either :

                  a. A model that shares both savings and losses from the beginning of a three-year period or

                  b. shares only savings in the first two years and shares both savings and losses in the last year.

8. ACOs will be required to demonstrate a partnership with Medicare fee-for-service beneficiaries by having a beneficiary represented in the ACO's governing body.

In order for ACOs to share in savings, ACOs would have to meet quality standards in five key areas determined by the government:   

Patient/caregiver care experiences

Care coordination

Patient safety

Preventive health

At-risk population/frail elderly health.

None of these measures are clearly defined. It will become a bureaucratic mess.  The results will compromise medical care. It will promote adversary relationships among and between stakeholders. It will promote dependence on the government’s bureaucratic discretion among stakeholders.

ACOs are much to complicated to work. The further along Dr. Berwick gets in constructing the infrastructure the harder it will be to dismantle it.

I believe this is the reason President Obama’s Justice Department is stalling the appeals process of the challenges to the constitutionality of President Obama’s Healthcare Reform Act.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.











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Electronic Medical Records (EMRs) And President Obama’s Economic Stimulus Package

 Stanley Feld M.D.,FACP,MACE

President Obama’s has created an incentive program to encourage physicians to adopt functional Electronic Medical Records.  The program’s $27 billion dollars (funded by President Obama’s Economic Stimulus package) will turn out to be a colossal failure and a waste of money.

Twenty seven billion dollars would provide $44,000 for 640,000 physicians. After the bureaucratic infrastructure is built the federal government will be lucky if one third of the money remains for bonuses to physicians.

Only 21,000 of 650,000 (3%) of physicians have applied to date.

 Complex bureaucracies and complicated regulations never save money. These bureaucracies create bigger government, inconsistent policies, more complicated regulations and inefficiencies.

The best and cheapest way to create a universally accepted and functional EMR is for the federal government to put the software in the cloud and charge physicians by the click for the use of the Ideal Medical Record.

Upgrades in software to the Ideal Medical Record will be swift , inexpensive and instantly adopted.

The federal government has done it before with an electronic billing system in the 1980’s. The incentive to physicians was to be paid in one week as opposed to the one to two months wait for payment using a paper claim.

Last week the proposed rules for defining “meaningful use” of EMRs starting in 2013 were published.

As soon as Stage 2 of President Obama’s EMR bonus program were published organized medicine complained that the rules were unrealistic and onerous.

Organized medicine is correct.  This usually happens when the bureaucracy piles one set of rules on top of another. The Stage 2 rules will discourage physicians from participating even at the threat of an undisclosed penalty.

 "Meaningful Use Workgroup Rules Regarding Meaningful Use Stage 2," from the Office of the National Coordinator for Health Information Technology requires the following in order to be eligible for the federal bonus;

Higher thresholds (in % of eligible patients, visits or orders)

  • Use computerized physician order entry (CPOE) (from 30% to 60%:
  • CPOE will expand from drug orders to lab and radiology orders)
  • Use e prescribing (from 40% to 50%)
  • Record demographics (from 50% to 80%)
  • Record vital signs (from 50% to 80%)
  • Record smoking status (from 50%to 80%)
  • Use medication reconciliation (from 50% to 80%)

Elective to mandatory requirements

  • Implement drug formulary checks
  • Record existence of advance directives
  • Incorporate lab results as structured data
  • Generate patient lists for specific conditions
  • Send patient reminders
  • Provide summaries of care record
  • Submit immunization data
  • Submit syndromic surveillance data

New measures

  • Use electronic physician notes
  • Offer clinical encounter information for download
  • Offer health record information for download
  • Ensure patient use of online portal
  • Ensure patient use of secure messaging
  • Record patient preferences for communication medium
  • Provide lists of care team members
  • Record longitudinal care plans


Physicians can receive bonuses from Medicare of $44,000 and Medicaid of up to 63,750 for installing and using an eligible EMR system.  These payments (bonus) if you qualify are taxable as ordinary income.

There are several practical problems;

1. Most physicians and physician practices cannot afford the time it takes to find an eligible EMR they can trust.

2. An EMR that might be eligible for federal bonus could cost $70,000 per physician.

3. Physicians cannot visualize the potential payback.

4. Physicians cannot visualize the added value toward improving quality care when quality care has not been adequately defined.

5.Physicians cannot get loans from banks to finance the costs.

6.Most physicians are uncertain about the future of their practices.

Thousands of physicians (3%) are trying to meet stage 1 requirements, which went into effect January 2011.

Eligible EMRs in Stage 1 must be able to meet 15 core measures of functionality and the physician's choice of five out of 10 elective measures.

In order to meet Stage 2 requirements physicians have to spend more money to upgrade their information system to be eligible.

"Unrealistic stage 2 requirements will overly burden physicians and hamper adoption — especially for those physicians in small or solo practice."

Karen Bell, MD, chair of Certification Commission for Health Information Technology said she “does not believe any vendor's system can meet stage 2 requirements yet.”

Developing EMR technology is expensive, and vendors don't want to build complete systems when the standards probably will change in the future.

A Family Practice Group of 4 physicians in Georgia recently spent $75,000 per physician upgrading the practice's EMR in order to meet meaningful use stage 1 requirements. Five years ago they spent $200,000 to launch their original EMR.

Fulfilling stage 2 requirements will probably cost at least another $75,000 per physician to continue qualifying for federal bonuses.

This Family Practice is chasing its own tail. It is working at the whim of a bureaucracy whose job it is to write regulations and not think of the consequences to practicing physicians.

Wouldn’t it be easier for the federal government to install its approved software in the cloud, upgrade it as necessary and charge physicians by the click?

Wasting $27 on bureaucratic regulations is a complicated mistake that is destined to fail.

$27 billion dollars could be better spent on direct patient care and the implementation of my ideal Electronic Medical Record   


The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.







  • electronic medical records

    Interesting post! thanks for sharing this update about “Electronic Medical Records (EMRs) And President Obama’s Economic Stimulus Package” I am well informed.

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