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ACOs Are Failing

Stanley Feld M.D.,FACP,MACE

A major component of Obamacare is the development of functioning Accountable Care Organizations (ACOs). The theoretically the ACO concept is good. The practical execution of ACOs is very difficult.

The way the bureaucrats in the government wrote the rules and regulations for executing ACOs make them almost impossible to execute.

The inevitable failure of ACOs was further guaranteed by the complicated reimbursement rules created by Medicare’s bureaucrats.

The goal was to create integrated health care systems that would efficiently deliver quality medical care at a lower cost.

ACOs are one part of this Administration’s vision for improving the coordination and integration of care received by Medicare beneficiaries.

ACOs are groups of doctors, hospitals, and other health care providers that work together to give Medicare beneficiaries in Original Medicare (fee-for-service) high quality, coordinated care.

ACOs can share in any savings they generate for Medicare, if they meet specified quality targets.”

Defining quality care is a problem. Another problem is designing systems to execute quality care. To date no one has defined quality medical care correctly.

I said from the onset of the development of ACO’s that the project would fail. Many experts criticized me. They called me  a dinosaur. They said I did not understand systems of medical care.

These people did not know that I was the guy that wrote the AACE guidelines for A System of Intensive Self-Management of Type 2 Diabetes Mellitus.

The way the Obama administration has designed ACOs, they are in reality HMOs on steroids.

They shift the responsibility of the cost of medical care to physicians and not the government.

In reality the cost of quality medical care should be the patient’s responsibility. Patients should be responsible for their care and their health care dollars.

I cannot understand why physicians do not protest.

I am a big believer in systems thinking. However, it has to be a system that is well thought out and well constructed. ACOs are neither.

It is clear to me that the bureaucrats do not know anything about medical practices or hospital politics.

The Obama administration originally picked 30 healthcare systems to be ACO Pioneers. They were called Pioneer Project Goups. Nineteen of the original Pioneer Groups remain.

The Mayo Clinic and the Cleveland Clinic were included in the original group of healthcare systems. These clinics were considered the most integrated health care clinics in the country.

The Mayo Clinic and the Cleveland Clinic turned down the Obama administration’s offer. They said they were happy with their system of care. The Mayo Clinic said they would not participate because they knew they would lose money participating in the ACO project.

I have written extensively on the reasons the ACOs would fail. I invite you to read or re-read these articles so as not to be puzzled by the upcoming outcomes of failures.

“Three out of four Medicare accountable care organizations did not slow health spending enough to earn bonuses last year.”

 In 2014 there were 353 accountable care organizations approved by Obamacare.  There are potentially 2700 hospital systems eligible to develop ACOs. The 353 accountable care organizations represent only 13% facilities available to participation rate.

The hospital systems not participating either fully understood why they could not form an effective or efficient ACO with the physicians on their staff or they did not have the money to execute the system and make a profit.

President Obama’s administration has bragged that the 353 participants represent a large number. The traditional mainstream media has parroted his assertion.

The mainstream media publishes this deception to the public as if It represents facts.  It is just one more deception by the Obama administration.

Private health insurance companys’ subsidiaries are in the process of setting up ACOs. They are trying to recruit physicians to shift the financial liability to physicians from insurance companies the same way unsuccessful HMO companies tried to shift financial liabilities onto physicians in the late eighties and early nineties.

The 353 participants include hospitals, physicians’ groups and healthcare insurance company ACOS. These groups have agreed to meet Obama administration targets for quality care and decreased costs.
In 2014 only 97 ACOs earned bonuses. The money these 97 ACOs saved was a total of $833 million. The 97 hospitals shared  $422 million dollars of that total.

Let us assume it was equally distributed among the 97 systems. Let us assume each of the 97 hospital systems has 1500 beds or 97 times 1500 for a total of 145,000 beds. Four hundred twenty two million dollars divided by 145,000 beds equals $2,910 dollars a year per bed or $7.91 dollars per bed per day.

A $7.91bonus per bed per day is an awful return on investment for the work and money necessary to develop an ACO.

What is more bizarre is there are only a few quality targets measured. Some of those measurements are not an accurate measurement of quality medical care.

It also means that the remaining 258 ACOs of the 353 ACOs either lost money because they did not reach targets or they came out even.

In 2013 hospital systems that lost money on certain targets had to pay the government back. The rule was dropped by the Obama administration after the bureaucracy figured out that this was not the way to promote the development of additional ACO’s.

I think I did the math correctly.

“Bonuses are awarded under formulas that account for hospital system performance on quality targets after the first year in the program.”

The results suggest that ACOs might not be the answers to bending the cost curve just as fudging the books is not an answer to delivering the quality healthcare improvement the Obama administration is seeking to have us believe.

The delivery of high quality coordinated care is very difficult to achieve in a government-regulated system of ACOs.

I believe the Obama administration’s plan for Obamacare has failed and has been very costly.

The government should develop a consumer driven healthcare system using my Ideal Medical Savings Account.

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

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Consumers must drive the healthcare system. Consumers have to be provided with the financial incentives to drive the system.


If America continues to go in the direction Obamacare is going, the cost will bankrupt the country.


Why Will Accountable Care Organizations (ACOs) Fail?


Stanley Feld M.D.,FACP,MACE

In an ideal world ACOs should work. There is no evidence that  untested and complex organizational structure of ACOs developed by Dr. Don Berwick (head of CMS) will improve quality of care and reduce costs

ACOs are supposed to provide financial incentives to health care organizations to reduce costs and improve quality. There are too many defects in the ACOs infrastructure to improve the financial and medical outcomes.

At a conceptual level, the incentive for ACOs would be to increase efficiency and avoid overuse and duplication of services, resources, and facilities. In this model, ACO members would share the savings resulting from the increased coordination of care.

I have said over and over again that excessive administrative fees and ineffective management of chronic disease is the main source of waste in the healthcare system. ACOs do not deal with these main drivers of costs.

The only stakeholders who can demand that this waste be eliminated are consumers/patients. Patients must control their healthcare dollars.  They will make sure there are competitive prices and will not permit duplication of services.

ACOs are not a market-based system. They do not put patients at the center of their medical care or permit them to choose their medical care. The government controls the healthcare dollars and is at the center of patients’ medical care decisions directly and indirectly.

In order to truly repair the healthcare system a system of incentives for patients and physicians must be created. There is no question that the processes of care for chronic diseases must be improved. More importantly, the medical and financial outcomes must be measured and not the process changes.

In theory, ACOs provide financial incentives to health care organizations to reduce costs and improve quality. In reality, given the complexity of the existing system, ACOs will not only fail; they will most likely exacerbate the very problems they set out to fix.”  

ACOs are merely the latest in a long history of unsuccessful health policy innovations. Since the 1970s, Congress and successive administrations have tried a number of tactics to control rising health care costs.  The tactics tried have been:  

  1. Payments for diagnostic related groups of services, or DRGs.
  2. Health maintenance organizations (HMOs).
  3. Preferred provider organizations (PPOs). 

They all failed. Consumers reacted negatively to the care provided. Healthcare costs continued to rise. ACOs are being promoted as the new structure that will address the lack of success of the past tactics.

Under Obamacare, the Secretary of the Department of Health and Human Services (HHS) is charged with developing a method to assign Medicare beneficiaries to ACOs.”

“ Because the statute is unclear about the resolution of many vital issues, the crucial details will be supplied and refined by federal regulators—as is the case for so many other provisions of the new health law.” 

Congress has relinquished its power to the unelected portion of the executive branch of government to construct a system that will reduce the rising costs.

ACOs create a new organizational structure to remedy problems inherent in the existing healthcare system.  The complexity of the structure of ACOs will result in the same or similar types of unintended consequences that led to earlier failures. 

There will be consolidation of providers. ACOs will result in increased costs rather than decreased costs.  It might decrease duplication of testing. The resulting savings will be small. There is no evidence that ACOs will provide improved medical and financial outcomes. I believe it is Dr. Berwick’s naïve wish that it will improve medical and financial outcomes. 

The are at least 7 key deficiencies with ACOs

  1. ACOs do not empower consumers to be responsible for their own medical care.  Healthcare should be consumer driven with consumers controlling their healthcare dollars. They will then make informed choices about their care and insurance coverage.

      2.ACOs create artificial incentives to improve quality and provider performance. Consumer driven           healthcare creates real incentives to promote price completion. Competitors are constantly           working to improve their products, attract consumers, and ultimately increase market share.  

Consumers have no part in driving that competition in an ACO system.

           3.Most physicians are reluctant to assume accountability for patient outcomes.  Physicians                           recognize that much of the outcome is directly under the consumer/patient behavioral control.

            4. ACOs remove the patient/consumer from being responsible or accountable for their medical                   care. ACOs undermine any attempt to create a truly accountable healthcare system that can                   drive down costs.

            5.ACO do not encourage provider accountability even though it seems that provider buy-in would            be integral to an ACO’s success with its shared savings incentive.  Many physicians believe the                  share savings incentive is bogus. 

            Providers continue to be paid for each service they perform until the government provided funds             run out. There are also grave uncertainties and practical complications of distributing production             and savings between the hospital system and physicians.

             6. ACOs create an unfair competitive advantage for large organizations that are hospital                 centric. Eligibility requirements are vague and ambiguous. The eligibility requirements                 suggest that larger organizations have an unspoken eligibility advantage.

                This is the reason hospital systems are trying to form ACOs. Hospital systems think they will                 make money. I think they will fail. Hospital systems will lose a lot of money. They will fight                 with their physicians over the distribution of government reimbursement. The cost of hospital                 care will then increase. The consumer will lose.

                7. Groups of independent practitioners as well as other types of small and mid-sized practices                     may lack the infrastructure, Internet technology, or other resources needed to qualify for                     ACO eligibility. They will be forced to join hospital systems. Hospital systems have a                     history of taking advantage of physicians and their skills and intellectual property. More                     tensions will be created. Hospital systems’ ACOs will crumble. The cost of medical care                     will continue to increase further.

I have presented some common sense observations. Common sense does not seem to prevail in the difficult world of repairing the healthcare system.

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






More ACOs Rules Will Mean More Problems For Obamacare

Stanley Feld M.D.,FACP,MACE

 I have written many articles on why I believe Accountable Care Organizations (ACOs) will fail.

ACOs are critical to the success of Obamacare as are many the other programs introduced by the Affordable Care Act.

If one listens to the Obama administration’s propaganda about how wonderful Obamacare has been for the American public, one would be living in a dream world, not the real world.

Obamacare has failed on many levels. The administration believes the public will not remember the previous failures.

Here are the failed promises.

  1. You can keep your doctor if you like your doctor.
  2. You can keep your health insurance policy if you like your health insurance policy.
  3. Each family will save $2500 dollars on healthcare each year.
  4. Anyone making less than $250,000 a year will not pay one red      cent in new tax.

The failures of Obamacare

  1. Obamacare will bend the healthcare cost curve. It bent the cost   curve for the first three years because Obamacare collected new taxes without providing healthcare services until 2014.
  2. Thirty-two (32) states refused to expand Medicaid.
  3. Twenty-two (22) of 50 states signed up to have state health insurance exchanges.
  4. All of the states that developed state co-ops with federal loans are under water. Fourteen of the 22 are bankrupt now. All will be bankrupt by 2017 or 2018.
  5. Private insurance enrollment though the federal health insurance exchanges has not increased for the last 3 years. Many of the buyers of health insurance exchange insurance have pre-existing illness. The health insurance exchanges are the only available insurance.
  6. The hospital system and private practice meaningful use electronic medical records have not increased percentage wise as expected.
  7. Worthless electronic medical records have increase at high costs to medical practices and hospital systems. These electronic medical records are providing some false big data information to the government and healthcare insurance industry to generate defective policy regulations. Hospital systems and physicians benefit little from the data generated.
  8. is still not right after spending billions of dollars over budget.
  9. Healthcare insurance premiums have skyrocketed for companies providing healthcare insurance to its employees.
  10. Healthcare insurance premiums have skyrocketed for people buying healthcare insurance from the federal and the few remaining state health insurance exchanges.

The only success I have seen is in Medicaid enrollment for the poor and illegal immigrants. The access of care has not improved for tax paying people.

These are just a few of the Obamacare failures. The public would never remember there have been so many failures reading the propaganda and press releases that appear from the government in the traditional mass media.

The Obama administration’s information has blurred those failures. I sense the public does not want to know about the impending disaster in the healthcare system.

Many intelligent people ignore these facts. They keep reciting the administration’s talking points about Obamacare’s success.

ACOs were supposed to lower healthcare costs. They were supposed to provide incentives for hospital groups and private practice groups to save money by providing more efficient medical care.

If these groups did lower the cost of care they would share in the savings along with the government.

There are many ways to achieve these savings and many measurements to determine these saving.

In short, ACOs were designed to shift the financial risk of care from the government to the physicians. If the physicians didn’t hit the benchmark they would lose money. The goal was also to shift to a flat rate payment for each illness from the individual fee for service based payment system.

Physicians will get paid a flat rate for a particular illness. It means that the risk for taking care of the illness at a particular cost shifts the financial burden to physicians and not the insurance company or the government.

The gigantic defect in the system is there is no burden on the consumer nor is there an incentive for consumers to be responsible for their health or healthcare dollars.

No risk is placed on the patient for compliance with treatment advice.

I have pointed out most of the defects in the ACO model in past blogs. ACOs are essentially an HMO on steroids. Hillary Clinton did not do too well in 1993 with the HMO model

ACOs do not address the problem of the high salaries of hospital administrators and healthcare insurance executives (who provide administrative services for the government). These salaries increase the cost of the healthcare system.

Last week CMS released another final rule intended to improve the way Medicare pays accountable care organizations (ACOs) in its Medicare Shared Savings Program (MSSP).

It is clear that if another final rule is made the last final rule is not working.

The hype of this new final rule is that the Obama administration has solved what many viewed as a critical flaw in the bonus structure for Medicare’s accountable care organizations.

I think the new final rule might make ACOs fail completely.

CMS spokesman said, ”Physician buy-in is critical for the long-term sustainability of the ACO program, which could play an important role within Medicare’s broader reforms to physician payments under the Medicare Access and CHIP Reauthorization Act, or MACRA.

MACRA is another poorly designed program that makes payment for physician service more difficult to understand.

MACRA could inspire physicians to quit the whole ACO enterprise.

A group of executives on the MACRA (Medicare Access and CHIP Reauthorization Act) task force said,

“The goal is to force physicians and payers determine how to most effectively tie payment to performance and value.”

“A panel of healthcare experts and organizational leaders who began adapting to value-based payment years before the Medicare Access and CHIP Reauthorization Act started fleshing out regulations talked about their programs at the event sponsored by the Commonwealth Fund.”It is obvious to me that you cannot force anyone to do anything they do not want to do. You can only provide motivation and incentive for people to do what is best for themselves from their point of view.

MACRA will not get physician buy in because it will be too restrictive, arbitrary and controlling.

So far there are only 433 Medicare Shared Savings Program ACOs. There are 3000 hospital systems that should be participating in the Obamacare’s ACO program.

Only 14% of the hospital systems are participating after 3 years.

There are many large physician practices that should be participating in the ACO program. The number of these groups are unknown.

The lack of participation is a result of the complexity of the ACOs, the inability to form a unified culture of physicians in a hospital system and the difficulty hospital systems have with pricing risk.

Pricing risk is the job of the healthcare insurance industry and not physicians or hospital systems.

The government wants to put that task on the shoulders of the physicians and hospitals.

There are two risk tracts for ACO. Tract one is called one-sided risk.

The ACO only shares in the savings and does not participate in the losses if they spend more than the benchmark costs.

Tract 2 is call two-sided risk. The ACO shares in the savings with a more generous bonus from Medicare than the bonus of the tract 1 participants but pays a penalty to Medicare if doesn’t save money or demonstrate high quality care.

Only 22 of the shared-savings 433 ACOs or 5% of the participating ACOs have chosen two-sided risk. The Obama administration’s goal is to have all 3000 hospital systems participate the two-sided risk model.

The participation rate is .7% participation rate for the 3,000 hospital system that should be participating. It is far short of the Obama administration’s goal.

I would not rate the ACO participation rate as a success after 3 years.

This absolute failure has not been acknowledged by the Obama administration or the Obamacare praise singing traditional mass media.

The new final regulations and MACRA will not fix this failure. It will only make the failure worse. I will discus both the new final rule and MACRA next time.

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

All Rights Reserved © 2006 – 2015 “Repairing The Healthcare System” Stanley Feld M.D.,FACP,MACE


Why Obamacare Will Fail

Stanley Feld M.D.,FACP,MACE

Obamacare will fail because none of the stakeholders’ vested
interest are aligned.

The storm is brewing in the healthcare system.

Even Democrats are concerned.

Recently, I have been criticized for blaming the impending failure
on President Obama. President Obama would rather blame the impending failure on

 A reader wrote;

“President Obama is a nice
guy. He is trying very hard. Give him a chance.”

It is true. He seems like a nice guy. My criticism is not personal.
The fact is his philosophy and tactics are responsible for the mess. As time
goes on it seems more likely that Obamacare will not work out.

There are multiple reasons for the impending failure. A major
reason is Obamacare is developing new perverse incentives for stakeholders
rather than aligning all the stakeholders’ vested interests.

Obamacare is extraordinarily complex. It is confusing to all the stakeholders,
 especially as new rules and regulations
are being written.

By forcing the development of programs such as health insurance
exchanges, accountable care organizations, pay for performance plans,
functional electronic medical records, and the consolidation of healthcare
hospital systems and physicians against their will, Obamacare is creating
tensions and uncertainties that will be difficult to overcome.

Patients’ medical care and their relationships with their
physicians are personal issues. Obamacare is commoditizing medical care. It is
destroying the patient physician relationships. These relationships account for
at least one half of the therapeutic effect of medical treatment.

The 2300 page law usurps the power of the legislative branch of
government and shifts it to the executive branch. This is dangerous. It has
created additional tension and uncertainty for the nation.

Many congressmen who voted for the law did not read the law’s 2300
pages. The implications of much of the law were not understood. It did not have
bipartisan support.

In 2012, the executive branch of the federal government issued another
70,000 pages of guidance for participants in Obamacare. The executive branch
has created at least 22,000 new regulations and 68,000 new ICM codes.

The more complex a law becomes the more likely it is to be unsuccessful.

There is no question the healthcare system nears repairing. Healthcare
costs are exploding. Waste and bureaucracy are expanding.  Dysfunctional interactions between
stakeholders are mounting.

All of this results in an inability to deliver effective medical

At present 55% of Americans of all ages receive healthcare
insurance through an employer sponsored healthcare plan. An additional 32% receive
healthcare insurance through government programs.

Thirteen percent (13%) of the population are uninsured or under
insured. Obamacare’s goal is supposed to provide healthcare insurance for that

Present predictions are that Obamacare will not provide universal
care. It is predicted that it will not save $850 billion dollars. The CBO, on
the basis of numbers provided by the administration,
predicted the law would
save $850 prior to the passage of the law.  The CBO’s current prediction is Obamacare will
cost the nation an additional  $1.2
trillion dollars over 10 years.

Healthcare insurance rates are rising by double digits each year.
Employers are passing the costs of the increasing insurance rates to their
employees through higher deductibles and copays along with lower healthcare
coverage plans.

 Obamacare will require
employers, who offer skimpy healthcare benefits such as Mini-med insurance, to
provide more robust ones.

To date the Obama administration has waived more than 2000
employers from providing more robust healthcare insurance coverage. At the time
these waivers expire companies with waivers, such as McDonald’s, will scream
bloody murder.

They will opt out of providing any healthcare insurance at all and
avoid government penalties. They will accomplish this by decreasing the number
of hours an employee will work to less than 30 hours a week. This is not good
for minimum wage workers. The uninsured rolls will increase.

The penalty of $3,000 per employee is less than the $15,000 healthcare
insurance cost per employee for employees working more than 30 hours a week.

Surveys have been published concluding that more than 50% of
employers are planning to drop healthcare insurance coverage.

The federal government is trying to discourage this by invoking
the IRS anti-abuse rules;

“The IRS has indicated that anti-abuse rules
will be implemented to curtail the use of Obamacare loopholes to
dodge the play or pay requirement.

  Yet as
some have already questioned, can the IRS legitimately utilize rule-making to modify
core components of a federal act? Or will this rule-based clean-up effort
simply spawn more lengthy litigation?”

Obamacare’s health insurance exchange program is in big trouble.
Less than half the states have signed up to participate.

 States have opted out
because of the potential cost overruns. States are struggling to balance their
budgets. The federal government is only going to pay for health insurance
exchanges’ development and execution for the first two years.  The cost burden will then fall on the states.

The federal government keeps extending the deadline for states to
sign up. The federal government does not have infrastructure or manpower to set
them up.

The health insurance exchanges are supposed to be up and ready to sign
up consumer up in October 2013 and operating in January 2014.

Physicians do not know what to do about Obamacare. Physicians feel
helpless. They know Obamacare cannot work. Physicians do not have a leadership
organization that can direct physicians to have an effective voice.

Accountable Care Organizations (ACO’s) will fail because physicians
are trained to use medical judgment. They have not been trained to obey the
rules of hospital administrators.

They bristle when their value is determined by hospital systems or
federal agencies such as IPAB. They prefer to have their value determined by
their patients.

Physician leadership needs a new mentality to enable physicians to
act and articulate  the steps needed to
be taken to repair the healthcare system.

Physicians want the healthcare system to function equitably for
all the stakeholders and effectively for their patients.

Medical organizations have been consistently losing membership
because it has not represented or articulated the needs of practicing

If Obamacare works as President Obama hopes, he will have secured
his legacy and solved the long-festering problem of the uninsured.

Obamacare will not solve the problems of increasing healthcare
costs nor provide universal care in its present form. This has been a pipe
dream all along.

Another reason Obamacare will fail is because it does not consider
the cost of defensive medicine significant. President Obama is not interested
in tort reform.

Obamacare doesn’t align any of the stakeholders’ vested interests.

When Obamacare fails it will provoke a citizen backlash that will
be very difficult to overcome.

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

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How Are Accountable Care Organizations (ACOs) Doing?

Stanley Feld M.D.,

 In a word the formation
of Accountable Care Organizations is doing poorly.

If one believes the CMS
press releases one would believe the formation of ACOs is doing well.

In the past, I have gone
into great detail on why I believe Accountable Care Organizations will fail.

I believe physicians and
hospital systems should be accountable for outcomes but only the outcomes they
can control.

They should not be
accountable for outcomes they cannot control.

ACOs are really HMOs on
Risk is transferred from the government to the healthcare providers.

HMOs failed in the 1980’s
and 1990’s because physicians and hospital systems realized that they could not
evaluate risk or manage risk.

It is impossible for
providers (physicians or hospital systems) to control patients’ behavior in
adhering to treatment for their disease.

It is almost impossible for
the government to commoditize reimbursement accurately for diseases unless the
government can weigh the risk of poor disease outcomes.

No one has figured out
the way to accurately risk weight the outcome of a patient’s disease and

CMS believes by
increasing the number of cod
es in ICD-10  to 68,000 codes vs. ICM-9 18,00 codes, the old coding system, the
government will be able to weigh risk leading to accurate cost assessment.

I believe this is a
fantasy of healthcare policy wonks working for the Obama administration.

Many physician groups
and hospital systems believe they will lose money taking on these risks. These
are the groups that are holding back and not forming ACOs.

It is the reason the
Mayo Clinic and the Cleveland Clinic have refused to form ACOs.

Nevertheless on January 1st CMS proudly announced that
it has nearly doubled the number of ACO programs in the country by adding 106
new ACOs to the existing 148 programs for a total of 254 programs to date

The CMS announced its latest and
largest round of accountable care organizations
 under the Medicare
shared-savings program.

I would not be as proud as CMS is to applaud this level of
participation in the ACO program. ACOs are the keystone of Obamacare.

Complete national participation is supposed to occur by January

There are a total of 254 ACO’s signed up in 50 states or 5.08 ACO’s
per state.  There are many more potential
ACOs per state than 5.08 per state.

CMS said half of ACOs are physician-led and
care for less than 10,000 Medicare enrollees.” 

This is not a good sign.
The success of the ACO program is defined as shifting the risk of medical care to
hospital systems and physicians.

What is the problem?

The problem is obvious.
The definition of insurance is,

“Insurance is the
equitable transfer of the risk of a loss
, from one entity to another in
exchange for payment. It is a form of
risk management
primarily used to
hedge against the
risk of a contingent, uncertain loss.”

“An insurer, or insurance carrier, is a company selling the
insurance; the insured, or policyholder, is the person or entity buying the
insurance policy. The amount to be charged for a certain amount of insurance
coverage is called the premium.

Risk management,
the practice of
appraising and controlling risk, has evolved as a discrete field of
study and practice.”

Risk management is far
from an exact science. Risk management depends on a large number of people
paying premiums who are not at risk for disease.

Obamacare’s goal is to
have all the low risk consumers pay for the higher risk consumers.

However, President Obama
has provided low risk consumers an out. The penalty for not participating is
modest compare to the cost of the insurance. If a low risk consumer gets sick
he can immediately join the health insurance exchange program without

The increased cost of
illness is compounded when a large number of patients have chronic diseases.

A contributing factor to
developing chronic disease is obesity.

America has a national
obesity epidemic.

Patients with Diabetes
Mellitus are vulnerable to multiple diseases such as hypertension,
hyperlipidemia, kidney disease, eye disease and vascular disease.

Each might be at a
different stage of progression. The risk for costly complications is different
for each at each stage of disease progression.

The diabetic might or
might not adhere to the treatment regime outlined. It is difficult to risk
weight these patients. It is risky to take the responsibility for the medical
care outcomes for these patients.

In reality the principle
risk managers are consumers.

Healthcare policy
experts have not practiced medicine. They either do not understand these risks
or they want to place the risk with physicians and hospital systems and provide
undervalued reward.

Many medical outcomes are
dependent on patient responsibility for managing their own risk. Patients must
participate in their own care to receive maximum benefit and the best medical outcomes.

Patients must become
professors of their disease.


There are many reasons ACOs will fail

1. ACOs
do not empower consumers to be responsible for their own medical care. 
Healthcare should be consumer driven with consumers controlling their healthcare
dollars. They will then make informed choices about their care and insurance

2. ACOs create artificial
incentives to improve quality medical care and provider performance.

3.  Consumer driven healthcare creates real
incentives to promote price competition by physicians and hospital systems. True
competitors will constantly work to improve their products, attract
consumers, and ultimately increase market share.  

In a systems of ACOs consumers do
not play a role in stimulating completion. Consumers are passive recipients of
treatment from an assigned ACO.

4. Most physicians are reluctant
to assume accountability for patient outcomes.  Physicians recognize that
most medical outcomes are directly under consumers behavioral control.

5.  ACOs structure does not include consumers’
incentive to be responsible or accountable for their own medical care.

 ACOs undermine any attempt to create a truly
accountable healthcare system that can drive down medical costs.

6. ACOs do not encourage provider
accountability.  ACO’s shared savings incentive
does not seem to be adequate for the risk assumption.  

 Providers will continue to
be paid for each service they perform until the government provided
funds run out for that ACO.

7.  There are also grave uncertainties and
practical complications of distributing government funds and savings if any
between the hospital system and physicians on the hospital systems staff.

 8. ACOs create an
unfair competitive advantage for large organizations that are hospital system centric.
Eligibility requirements are vague and ambiguous. The eligibility
requirements suggest that larger organizations have an unspoken
eligibility advantage.

 9.  This is the reason
hospital systems are trying to form ACOs. Hospital systems think they will make
money. I believe hospital systems will lose money. The government will have to
supplement payment for hospital systems to stay afloat.

10. When hospital systems lose
money they will fight with their staff physicians over the distribution of
government reimbursement.

 The cost of hospital services will then
skyrocket further. Consumers will be the losers.

11. Groups of independent
practitioners as well as other types of small and mid-sized practices may
lack the infrastructure, information technology facilities, or other resources
needed to qualify for ACO eligibility.

12.  They will be forced to join hospital systems.
Hospital systems have a long history of taking advantage of physicians
skills and intellectual property.

 Tension between hospital systems and staff
physicians will be created. Hospital systems’ ACOs will crumble. The cost of
medical care will continue to increase further.

These are just a few of the reasons ACO’s will fail.

No matter how hard CMS tries to change the narrative
these are some of the reasons explaining the lack of hospital and physician participation
to this point.

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


Evidence For Impending Healthcare System Failure

Stanley Feld M.D.,FACP,MACE

The following are the links that is the evidence for the impending failure of the healthcare system in its present form and in the form that Obamacare is adopting.

Obamacare is piling on more regulations and restrictions to the present healthcare system. The present system is a failed system.The regulation will be impossible to comply with and impossible to enforce. They will create more opportunity for secondary stakeholder to extract more funds from monies needed for direct patient care creating a greater decrease in access to care for all .

The links follow the slides I presented in my last blog. Those links could not be opened because they were jpegs.

My hope is the links serve as an excellent reference to Repair The Healthcare System presently or when it collapses under it unsubstainable costs and the present system's inability to be executed.

The Etiology of Accelerated


Medicare 1965-1980 Fee for

authorized HMO’s

Medicare Price Fixing Begins In 1980

Cost shifting Penalizes Private

HMO Fail Because Of Faulty Assumptions In 1990.

 Reasons for Hillarycare’s
Failure To Pass.

Distrust of Government

Healthcare Insurance Companies
Raise Premiums.

Birth of Managed  Care: Another Compicated Mistake  

Managed Cares Fails. 

Managed Care Pricing And
Premiums Remain

2009 Obamacare And The Threat
Of Government Takeover To Freedom, Liberty and Choice.

Rationing Of Healthcare

ACOs Are HMO's On Steroids Combined With Managed Care Is Obamacare's Complicated Mistake. 

ACOs Will Fail At Great Costs To Everyone.

 Tort Reform And Defensive Medicine Are Ignored By Obamacare.

Medical Cost Escalate Out Of
Control And Then The Healthcare System Will Collapse.

The other major slide in the last blog was the barriers to the
Physician/Patient Relationship. This relationship is critical to the
theraputic index. It is almost destroyed and will be totally dstroyed in
Obamacare. Both physicians and patients will become commodities in a
bureaucratic healthcare system. Patients will not win.


Physician/ Patient Barriers to the Physicians/Patient Relationship



The Physician/Patient

physician/patient relationship

 The Magic  of the Patient Physician Relationship  

 Patient and
Physician responsibility contract

 Patient should be the leader of the team

 Barriers for physicians in the Physician/Patient


1. Tort
Reform/Defensive Medicine.

2. Restriction
of Physicians Clinical Judgment

3. Medicine
is a calling not a business

  4.  Constant
lowering physicians’ reimbursement

 5. Physicians
are driven to decrease time spent with patients

6. Government
rations care through panel of experts

7. Physician’s
treatments are driven by government regulations

8. The
traditional media undermining physician credibility

9. Government
is attempting to commoditize medical treatment


Patient Barriers To the Patient/Physicians Relationship

1. Patients are not in control of their own medical decisions.

2. Patients are not in control of their own healthcare

3. Patients
do not have to be responsible for their treatment because they

first dollar coverage.

4.  Education about chronic disease must be extension of
physician’s care

5.  Internet can undermine the Physician/Patient

6. Method of choosing a physician is random and must be
made clearer

7. Portability of information about previous treatment
is difficult

8. Patient must be responsible and in control of their
medical record.

9. Patient must endure poor communication by their

Government and the healthcare insurance industry limit choice with


11. Patients should be responsible for their treatment

America's healthcare system is at a critical turn in 2012.

Obamacare must be repeal.

Effective healthcare reform is essential. Both the primary and secondary stakeholders have abused a system. A system that is punitive.

Consumers must drive the system by being responsible to themselve and their healthcare dollars.

Obamacare is building a system of government dependency by all stakeholders (patients,physicians,hospital and healthcare insurance companies).

The healthcare system should be developed to create innovation and competions among stakeholders for the benefit of consumers and their indepent choice.

The government's inefficiency will create a healthcare system destined to doom at the expense of all of us taxpayers.

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

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Hospital System Monopolies And ACOs

Stanley Feld M.D.,FACP,MACE

I have been a constant critic of Accountable Care Organizations. I have said they cannot work to the benefit of patients and physicians because of the difficulty of organizing them and the subsequent unintended consequences. ACOs will increase the costs to the government and healthcare insurance industry to provide the administrative services.

Government has proven over and over again its ability to make complicated mistakes. These mistakes result from bloated bureaucracies and conflicting bureaucratic missions.

Additionally the government outsources administrative services to the healthcare insurance industry. Administrative services fees are constantly increasing because of waste, inefficiency, and mark-ups.

Hospital systems have been merging for 15 years. In the process they are attempting to buy physicians practice and provide a salary for physicians.

 Hospitals are brick and mortar structures. They are not the future of medical care. Hospitals, now hospital systems, had to change their business plan because more and more patients are being treated out of the hospital.

Outpatient clinics, diagnostic imaging centers, chemistry laboratories and ambulatory surgical centers have shifted income from hospitals to physician owned outpatient clinics.

Hospital systems goal has been to buy physicians’ practices and ancillary care facilities. Hospital systems’ consultants have concluded that they would be in a better position to negotiate price if they owned the physicians infrastructure regardless of the cost and pay physicians a salary.

The published reason given for this action is to provide better and integrated medical care within their hospital system. The real reason is to capture the revenue lost to outpatient facilities and profit from physicians’ productivity. Physicians are realizing they are being taken advantage of and are demanding their fair share of their own productivity.

 The Federal Trade Commission is supposed to have the authority to challenge monopolistic hospital mergers to protect consumers.


In 1996, the FTC amended its policies on health care mergers. The new policy encouraged hospital systems to merge by providing safe harbor to competing hospital systems when the hospital system could prove their hospital could achieve sufficient clinical integration.


The definition of sufficient integration was very loose and ill defined. The government thought it could save money by having all the fees under one roof. The FTC encouraged healthcare system monopolies in order to achieve more efficient and integrated care. It did not realize it would bite them in the leg someday.

It has always been a mystery to me how the government came to this conclusion. Suddenly the government has realized that the monopolies have turned on it and are in a position to demand more reimbursement. 

J. Frank Rosch the FTC Commissioner said,

 “I thought that the 1996 amendments…were the biggest loophole in the antitrust laws I had seen,”

 “Subsequent Advisory Opinions issued by Commission staff…were about as clear as mud.” 

Dr. Donald Berwick and President Obama claim that Accountable Care Organizations are the cure to our rising healthcare costs. A gigantic and expensive bureaucratic system has been constructed by CMS to regulate these new ACOs.  ACO’s promote further consolidation and mergers of physicians and hospital systems.

“The net result” of ACOs, says Rosch, “may therefore be higher costs and lower quality health care—precisely the opposite of its goal.”

Remember the government outsources all of the administrative services to the healthcare insurance industry. I have shown how the healthcare insurance industry has taken 30 to 50% of every Medicare healthcare dollar to the disadvantage of the taxpayer and seniors. 

Large merged hospital systems have in turn taken advantage of their size to take advantage of the healthcare insurance industry.

The healthcare insurance industry has taken advantage of the government in pricing administrative services.

Finally, the government has taken advantage of seniors by increasing Medicare premiums, increasing deductibles and decreasing benefits..

“ The final ACO guidelines, says Rosch, are “extraordinarily generous to providers,” and will constrain the FTC’s ability to block exploitative provider mergers.”

The Congressional Budget Office, much to the dismay of Obamacare’s advocates, did not think ACO’s would save much money in ten years.

 The CBO projected that the Medicare ACO initiative would save $5.3 billion over ten years.

 “In other words,” Rosch points out, “the savings to Medicare from the ACO program are no more than a rounding error. Yet even the CBO’s modest cost savings projections are likely overstated.”

 This supposed savings amounts to eight-hundredths of one percent of Medicare’s spending over the projected ten years.

People have a tendency not to do the arithmetic when present with what sounds like a big number.              

 “Against the very meager prospects for cost savings,” Rosch concludes, “there is a very real risk that some ACOs will be formed with an eye toward creating or exercising market power.

Middle-class Americans are already struggling with the burdens of the rising cost of health insurance. The potential ACO policy blunder is not to be taken lightly.

 Obamacare’s failure will skyrocket our federal debt. The lack of consideration of the dysfunctional dynamics of the healthcare system will result in unintended consequences that will create greater dysfunction and higher costs.  

Obamacare and ACOs will end up making health care even less affordable and accessible.

Maybe that is President Obama’s goal.


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

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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.









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.