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Accountable Care Organizations: Another Complicated Mistake

Stanley Feld M.D.,FACP,MACE

Before I beginning I would like to congratulate the Texas Rangers for the magnificent baseball they played against the New York Yankees bringing the American League pennant to Dallas Texas.


Accountable Care Organizations: Another Complicated Mistake

One the many pilot programs being set up by President Obama’s healthcare reform law is Accountable Care Organizations (ACOs). ACOs have become the latest fad among health policy wonks desperate to control costs and boost quality in healthcare.

“An Accountable Care Organization ( ACO) is a health system model with the ability to provide and manage the continuum of care across different institutional settings. These settings include ambulatory (outpatient),inpatient hospital care and post acute care.”

“ACOs should have the capability of planning budgets and resources and are of sufficient size to support comprehensive, valid, and reliable performance measurement.”

In turn, it has become a source of confusion for hospital administrators. Some administrators are hiring healthcare policy consultants to help them create ACOs.

President Obama’s contends ACOs will raise the quality of care and lower the cost of medical care simultaneously.

This is pie in the sky thinking. All President Obama has to do is look realistically at the success rate for Accountable Care Organizations. He continuously uses the following examples of ACOs success:

“What our system needs are more Kaiser, Geisinger, Mayo and Intermountain health systems. These are the integrated delivery systems that are already delivering higher quality and lower costs.”

My question is where is President Obama’s data? Mayo is in the process of not accepting Medicare. Mayo is losing too much money servicing Medicare and Medicaid patients.

Mayo said last week it will no longer accept Medicare patients at one of its primary care clinics in Arizona. Mayo said the decision is part of a two-year pilot program to determine if it should also drop Medicare patients at other facilities in Arizona, Florida and Minnesota, which serve more than 500,000 seniors.”

Mayo says it lost $840 million last year treating Medicare patients, the result of the program’s low reimbursement rates.

In Arizona Mayo lost $120 million dollars. The losses are usually made up by cost shifting to the private insurers and private patients. These losses are getting harder and harder to make up by cost shifting.

"Mayo Clinic loses a substantial amount of money every year due to the reimbursement schedule under Medicare," the institution said. "Decades of underfunding and paying for volume rather than value in Medicare have led us to this decision."

This is a direct contradiction of President Obama’s contention.

Medicare and Medicaid programs have been no more successful than private insurers in supporting the growth of these organizations. Real health reform will occur when President Obama recognizes patients own their diseases. Patients must have appropriate incentives and be active in their care.

Massachusetts has published data on costs. The cost of care has not been reduced by Partners Healthcare System, an integrated delivery system at Massachusetts General Hospital.

“But there is no sign that Partners has used its size and scale to deliver care at a lower cost. Indeed, there is evidence that it has used its market power to extract higher rates from insurance companies.”

There are no data showing that quality, safety, and efficacy in the delivery of care throughout the Partners system is better than other community hospitals or academic medical centers in the area. .

On January 1,2012, Kathleen Sebelius is supposed to establish a Shared Savings Programs through Accountable Care Organizations in which authorized providers contract with the Secretary of HHS to manage and coordinate care for Medicare beneficiaries.

Acceptable providers include group practices, networks of practices, hospital-physician partnerships and other groups that the Secretary deems appropriate.

Kathleen Sebelius has been empowered by President Obama’s healthcare reform law to use her discretion, without congressional oversight about who will be appropriate providers.

In order to be deemed appropriate ACOs must:

  1. Care for at least 5,000 patients.
  1. Have a sufficient number of primary care professionals.

The number of primary care providers has not been defined by Kathleen Sebelius at this time. The term primary care providers has been used rather than primary care physicians. It is a subtle point overlooked by many. A nurse practitioner or physician assistant is a provider. It is only a matter of time before a shortage of primary care physicians will be replaced by M.D. equivalent providers.

  1. Have defined processes to promote evidence-based medicine.

This is a slippery slope. There is constant change in definitions of the best evidence based medicine. There are also defects in clinical studies.

  1. Coordinate care through telehealth, remote patient monitoring and other enabling technologies.
  1. Meet patient-centered criteria established by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans.

Kathleen Sebelius alone controls the money and makes the determinations for appropriate care. How would you feel if the government selected and bought your car or dress shirts? Big brother is getting bigger and bigger on President Obama’s watch.

Patients own their disease. Neither hospitals or physicians can control complications of chronic disease. They cannot control most readmissions. They should not be liable for those readmissions.

Hospital systems would love to hire physicians and own their intellectual property. They have been unsuccessful in multiple attempts. Previous attempts have cost them dearly.

Hospitals are confused and terrified of the potential financial consequences of ACOs. The rules are vague. Hospital are hesitant to invest to form an ACO.

President Obama wants to control every aspect of clinical medicine.

It is time to face the real issue explicitly. President Obama wants hospital systems to form integrated delivery systems. The ACO concept has not been well thoug
ht out by President Obama. The concept is a non- executable mess. President Obama wants them because he thinks knows best.

He wants to shift the responsibility for costs of insuring patients from the government to hospital systems with hospital systems controlling physicians. He wants the government to pay a fixed low price for medical care. Providers will have fight with each other over distribution of the funds.

Accountable Care Organizations are really HMOs in disguise.

“While we are at it, who is looking at the issue of plan design? If you create ACOs, you probably intend to limit consumer choice of physicians and doctors as part of their insurance plans. Do you mean to put the primary care doctors in the middle of that issue, restoring them to the hated "gatekeeper" role we saw during the era of managed care?

Physicians and hospital systems are starting to figure t out. The best way to fight a war is not to show up. Patients will lose.

Health policy wonks are telling hospitals to form ACOs because they will get privileged funding. Hospital systems are having difficulty understanding the logic.

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

  • Gregg Masters

    Hi Dr Feld:
    Good to see the wisdom of the elders injected into the current conversation of health reform implementation.
    I remember well the days of SHP, and the ‘challenging’ extraction of the ‘H’ from the SHP/Genesis joint venture PHO!
    I’d like to guest post your article on ‘ACO Watch’ (, do I have your permission?
    Clearly, we’re resuming the debate on how to re-engineer our unsustainable sick care system; one key question is will we have learned from the mistakes of the past, or is this ‘deja vu’ all over again?

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