Stanley Feld M.D., FACP, MACE Menu


Another Big Mistake!


Stanley Feld M.D.,FACP,MACE

On July 1, with great fanfare, CMS announced that 89 organizations have been chosen to serve the healthcare needs of some 1.2 million Medicare beneficiaries in CMS’ Accountable Care Organizations (ACO) program.

Many of the premier integrated health systems, such as Mayo Clinic, Cleveland Clinic, Geisinger Health System, and Intermountain Healthcare had rejected an invitation to participate in the program in June 2011.

Among the reasons for rejecting the government’s offer to be a participant were the complex, contradictory and burdensome rules, the risk in shared savings, and the need for participating patients to be included in oversight boards.

Leaders of all four organizations praised the ACO concept but criticized the proposed implementation.  Geisenger Health System said “

 “It seems to be very prescriptive and restrictive with a fair amount of administrative and regulatory oversight."


The recent CMS press release makes it sound as if the ACO program is off to a good start.

Totally false!

There are 35 million seniors and disabled persons presently on Medicare. The program will include 1.2 million Medicare patients.

  • 1.2 million Medicare enrollees represent less than 3.4% of patients on Medicare.
  • The number of organizations enrolled does not represent validation of the acceptance of the ACO process by the medical community.
  • It does not represent validation of the contention that routing Medicare patients through ACO’s will save money. 

The growth in the cost of care’s baseline, on which an ACO organization will be measured, is not defined. The participating ACO organization cannot possibly know what the downside risk is.

It looks like CMS waived the downside risk temporarily for 84 of the 89 ACO’s who signed up. The waiver will not last forever. When it ends it will be too late for these ACO’s to get out.

CMS delayed the original start date from January 1,2012 to July 1,2012. This was an ominous sign. As far as I can tell no one has any idea how many of the groups signed up are integrated care groups.


I have written several articles explaining why I believe ACO’s will be a gigantic waste of government money, which will add to America’s deficit.

 “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.”

 "Dr. Don Berwick and his associates have a naïve view of the ability of organizations to form and execute Accountable Care Organizations (ACOs). ACOs fit well into President Obama’s worldview of government controlling our healthcare system."

There are three major problems:

  1. The government is broke. It does not have the money to pay for a government takeover of the healthcare system.
  2. New systems need participant cooperation to succeed.
  3. Creating a fully integrated healthcare system is difficult to nearly impossible unless the system has salaried physicians and a fully transparent hospital/physician provider organization. This will not happen soon in the current hospital and physician cultural milieu.

“President Obama and Dr. Don Berwick have overestimated the abilities of the healthcare system to respond to their hubristic assumptions.

 “The ACO program is based on the hubristic assumption that the federal government can design the best organizational structure for the delivery of care, foster its development, and control its operation for the entire country."

Physicians and hospital system will not cooperate because: 

  • Physicians and hospitals have little experience or control in managing risk.
  • Physicians and hospital systems experience with HMO’s in the 1980’s proved their inability to manage risk.
  • It was a painful financial experience for both.
  • Most physicians and hospital systems are not very interested in assuming this risk again.

 The risk of ACOs has been sugar coated by the administration.

Patients are the only stakeholders who can control their healthcare risk. All health policy wonks ignore the role of the patients in controlling and managing their healthcare risk.

 Dr. Berwick thinks hospitals and physicians will be motivated to control patients’ healthcare risk with ACOs.

He is wrong. I predicted participation would be minimal.

Physicians take on enormous risk taking care of patients presently. The risk increases when patients do not follow physicians’ treatment recommendations.

 Physicians are in no mood to take on financial responsibility and malpractice risk for actions that might fail because of patients’ non-adherence. Patients have to be motivated with health and financial incentives to comply.

Those physicians and hospital systems participating in the ACO program will lose financially and professionally.

There are several other key points for the lack of success of the ACO program

  1. " Obamacare uses Medicare reimbursement as an incentive to create accountable care organizations (ACOs), which the federal government has decided are the way to deliver quality care at lower cost.
  2. Proposed regulations by the Centers for Medicare and Medicaid Services (CMS) are largely confusing, impenetrable, and inconsistent.
  3. They give CMS detailed control over ACOs and the providers who participate in them, including censorship of ACO communications with Medicare beneficiaries.
  4. Medicare beneficiaries are assigned to ACOs without their knowledge or consent.
  5. Membership, in reality, is a retrospective bookkeeping entry relevant only to financial dealings between CMS and the ACO. ACOs may even have to pay money back to Medicare if they do not meet CMS goals for savings.
  6. The incentives offered to ACOs are diffuse and speculative, entailing intrusive regulation of ACOs and providers.
  7.  ACOs as defined by Obamacare are fatally flawed and cannot be fixed by merely changing the proposed regulations."

 This is neither a Democrat nor Republican issue. It is an issue of developing a healthcare system that will work. The cost of developing this government controlled healthcare system that is doomed to fail is enormous.

The Mayo Clinic, Cleveland Clinic, Kiesinger Health System, and Intermountain Healthcare are probably the most integrated healthcare systems existing in America. They visualized the lack of potential for success in ACO’s present structure.  

Thirty-six organizations signed up for the Pioneer Demonstrations ACO 6 months ago. The list and details can be found on the CMS fact sheet. The details of the deal they made are not easily available.…/PioneerACO-General-Fact-Sheet.pd


 It is worth studying all of the organizations that were selected for the Pioneer ACO program. These organization must believe they are in a no lose situations. They will find out that they will lose and it will be too late to get out.

All of the organizations represent a very small percentage of practicing physicians.  These physicians take care of a very small portion of Medicare patients.

It will take several years and much money to decide the ACO’s will fail. The only healthcare system that will align all the stakeholders’ incentives is my Ideal Medical Savings Account.

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

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  • John Lynn

    I love the commentary and the strong view on ACOs. It is a terrible sign that the major integrated health systems aren’t participating in the government ACO.
    I love your points about the risks that doctors currently take are an issue and get worse with an ACO. I wrote about this before: I’m from Vegas and participating in an ACO is very much like gambling.

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