Stanley Feld M.D.,FACP,MACE

I received the following note from Dale Fuller M.D. a retired Radiation Oncologist. Like me Dr. Fuller does not have a billfold agenda for Repairing The Healthcare System. I will add my comments to his extensive critique of Accountable Care Organizations (ACO).

“I read your piece this morning, and a number of thoughts come to mind; One is a quote from Richard Nixon, who when he was "vamping for time", would say.”Let me say this about that!"  In this case the "that" is the issue of ACO’s. It stimulated some general ideas about how medicine is structured, and how care is or could be paid for.”

Dr. Fuller has expressed some of the same concerns that I have about ACO. He nailed it with his concern for the hospital systems taking advantage of physicians’ intellectual property.

It concerns me that the lead in the formation of ACO’s is generally a hospital, and most often, a large one, with multiple sites of service.  My fifty years in medicine have caused me to recognize that the management of hospital organizations and the leadership of doctor groups of any size, small or large, do not have interests that are congruent.

When hospital systems realize its vested interests must be aligned with physicians’ vested interests systems such as ACO might be effective.

I have no reason to believe that the administrators of hospitals understand the business side of medicine very well. Hospital administrator may be able to learn the business of medicine over time. The doctors would be well advised to "watch their hats and coats" while the learning is taking place.

Moreover hospital administrators tend to come and go, sometimes with great frequency, and each change brings new managers with new management strategies. Doctors, changing as they do with much less frequency, will have to learn to adapt to constantly to new management strategies.

Hospital administrations usually change because the hospital is not making enough money. Hospital systems might not make enough money when administrators treat staff physicians poorly. Physicians can undermine hospital systems’ built in profit leverage. Physicians’ may have also negotiated too good a deal.

Some of those changes will in one way or other impact physicians’ earnings. That is to say nothing about recognizing the difference in the earning expectations and compensation strategies among the various specialties likely to be swept up together in an ACO.

The division of the "pie" of dollars will be a daunting exercise, just as it is now, but with the added complexity of hospital administrators adding their own expectations to the process, and claiming their own piece of the pie.

The transition will mark the end of the era of the practice of medicine as a "cottage industry" as it is transformed into an assembly line approach to the delivery of  the care of patients.

You can bet the process of dividing reimbursement will be contested. It is difficult enough when deciding compensation among physicians in multi specialty groups.

“In your piece you mention that the dollars paid to the ACO will still be procedures based, and I believe that same process, probably with RVU’s, could easily be translated into an algorithm to facilitate the division of the revenue to those delivering the services, with, of course, that healthy slice off the top, for the administration of the ACO, provided by you-know-who.(hospital administrators).

Physicians are beginning to understand that the healthcare insurance industry loads its overhead. As physicians enter into partnerships with hospital systems they are starting to realize that the hospital systems administrators overload physicians overhead. Hospital systems pay all the overhead for employees, rents and equipment maintenance many times at an inflated fee.

Physicians are not stupid. They are starting to wake up.

“I have the sense that not only of the adage "he who has the gold makes the rules “will apply, but in addition, "he who has the data controls the flow of payments".  And, more often than not, the data is controlled by the insurance companies and by the CMS (aka the government)”

  Generally the doctors are pretty clueless about the existence and the potential usefulness of the data, prevented as they have been from negotiation with the payers with both sides having equal access to that information.

I have been told by healthcare insurance executives that physicians will remain clueless. I replied that physicians are a sleeping tiger. When they awake the party for secondary stakeholders will be over.

Physicians are reluctant to purchase and install expensive electronic medical records. Data such as claims data have been used against them. Claims data are inaccurate. Physicians are starting to learn how to collect data to be used for their advantage.

“The data is all there and could readily be used to develop case rates for individual diagnoses, or, given the characteristics of a given patient population, a capitation rate could be set quite easily based on the experience and the risk factors inherent in the makeup of the population.”

Useful data presupposes a large data base. Most of the physicians are solo or in small groups. It had been impossible to calculate capitation rates with data available in the past.

A large margin of error must be built into the cost of care. Patients are becoming sicker because of the obesity epidemic and poor lifestyle choices. Patients over utilize the healthcare system because they have first dollar coverage.

“ Once the ACO is paid, the division of the income could be made in a variety of ways, the easiest being by the Relative Value Units (RVU’s) for the services provided to the patient by the physicians.  The physicians in the ACO over time should be able to monitor the actual RVU’s reported by individual physicians.”

From the physician side if the RVU’s were fair and primary care was valued appropriately. ACO might work. ACO would not control patient utilization of the healthcare system. Patients must be motivated and incentivized to control utilization.

“When "outliers" are identified, those physicians can be re-educated about the wisdom of practicing medicine with some greater level of restraint where the provision of services is concerned.  Some of the larger organizations are already using such an approach with the evolution of clinical pathways.”

Data could be used and should be used constructively to control outliers. Groups of physicians must control the data and discipline to outliers. A peer group must have incentive to control “outliers”. It must be done in a non punitive way.

“It isn’t all that easy.”

ACO will no
t decrease costs.

“An ACO will change forever the business side of medical practice, but that may be the way the ball will be made to bounce”.

An ACO might wake up physicians and patients. It might stimulate secondary stakeholders not to take advantage of primary stakeholders (physicians and patients). I believe the chances are slim.

All in all, it is a good time for the docs to be very careful, and not to rush into something they may later have cause to regret.    DEF

The idea of ACO is a good one if it could be priced fairly. The patient incentive component is missing. Consumers of healthcare with first dollar coverage drive increasing utilization and costs.

Prevention of the onset of disease and the complications of chronic disease will drive the cost down. This can only be accomplished by consumer driven healthcare utilizing the ideal medical savings account.

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

Stanley Feld M.D.,FACP,MACE

Why will President Obama’s Healthcare Reform Plan fail? Medicare and Medicaid have unrelenting increases in its yearly deficits. Both programs as well as the available private health insurance do not provide incentives to consumers or physicians to improve the healthcare system.

Consumers, who have healthcare insurance have been passive until now. “If I get sick my insurance will take care of me.”

As more people get sick they realize they are uninsured.

Therein lies the problem with President Obama’s Healthcare Reform Plan. It forces the consumer to be dependent on the government rather than to be responsible for health and healthcare.

Sometimes patients cannot help it if they get sick. Some illnesses are genetic. Some illnesses are environmental. Many illnesses are preventable.

Healthcare reform should put an emphasis on disease prevention. It should provide incentives for consumers to prevent disease and incentives for physicians to teach patients to avoid complications once they have a chronic disease.

Prevention of the onset of chronic disease and the complications of chronic disease require motivated consumers. It also requires the elimination of environmental hazard that precipitate chronic disease. There are many examples of environmental hazards (air pollution, toxic wastes, cigarette smoking, and obesity to name a few).

Let us take obesity as an example.

Is there any language provided in any of the bills before congress addressing the obesity epidemic?  No, yet obesity predisposes consumers to Type 2 Diabetes and coronary artery disease. Medical care of these two problems cost the nation $400 billion dollars a year.

In a March 26, 2008 article in the New York Times, New York City was declared Fat City? Ten (10) million pounds were gained in 2 years according to the April issue of Preventing Chronic Disease, a medical journal published by the Centers for Disease Control and Prevention.

“About 173,500 adult New Yorkers became obese and more than 73,000 received new diagnoses of diabetes from 2002 to 2004, according to a new study by the New York City Department of Health and Mental Hygiene. Put another way, “the citywide weight gain totaled more than 10 million pounds in just two years,” the city noted in a news release summarizing the study.”

President Obama should be concentrating his efforts on how to motive people to lose weight in order to avoid the onset of Diabetes Mellitus and Heart Disease. He and his healthcare reform team should study my “War on Obesity.”

None of the necessary steps are being taken by the administration to solve Obesity in America. Without a solution to the obesity epidemic, the Type 2 Diabetes Mellitus epidemic will continue and the cost of President Obama’s new entitlement plan will escalate.

How should President Obama motivate people to be responsible for their own care? He should provide incentives. He should propose and enforce regulations that provide consumers with a healthier food environment.

A first step would be to deal with farm subsides that encourage obesity. It can be done. He must also provide effective education to the public to combat obesity. He must provide economic incentives to consumers to exercise and lose weight. This can be accomplished by the ideal medical savings account.

President Obama should become serious about dealing with malpractice reform. The cost of defensive medicine is $750 billion /year. Consumers must be educated to demand tort reform. Defensive medicine would affect the remaining balance in their medical savings accounts. Consumers should be taught to demand an explanation for the tests from their physicians. Consumers could be taught to waive physicians’ liability if there is no good reason for a test. Physicians have not been sued for tests they have done. They have been sued for tested they have not done.

President Obama should be spending money on a system that encourages innovation (the ideal medical savings account) rather than spending and wasting money on a new entitlement for a healthcare system that is broken.

I will repeat my answer to your question. Your employer or the government pays for your ideal medical savings account.  The entire policy (the $6,000 deductible and the $6,000 high deductible policy) remains tax deductible to your employer.

You have the responsibility to use the first $6,000 wisely and remain healthy. If you do not spend it you keep it in a trust account tax free for retirement and not for future healthcare needs. If you use it before you retire you pay ordinary income tax plus a penalty. If you spend more than $6,000 you receive first dollar healthcare coverage.

If you are self employed and qualify for government aid or a subsidy the government pays for healthcare premium. If you are on Medicaid the government remains the payor.

All citizens would have the same healthcare coverage. Everyone would be responsible for their choice of lifestyle. President Obama would instantly have 300 million consumers repairing the healthcare system. It would take major control of the healthcare system out of the healthcare insurance industry’s hands.

Stimulating innovation would decrease the cost of healthcare while insuring everyone. It would improve wellness and quality care.

Expanding an entitlement is not the answer to Repairing the Healthcare System.

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

Stanley Feld M.D.,FACP,MACE

I agree with the general goals of healthcare reform as outlined by President Obama. They are universal healthcare, affordable healthcare, and quality healthcare. The problem is the route he is taking will not achieve his goals.

His route will increase bureaucracy, decrease freedoms of individuals to choose, decrease quality and increase the cost of care.

A reader question highlights the confusion about the ideal medical saving account.

“ Do I understand you expect me to pay $500 per month toward tax free trust account and also budget $500/month for medical expenses toward my deductible?

How does a person making under $28,000 year do this!

The answer to the question is no.

The government or your employer would pay the $500 per month for you into a trust account. This would put the first dollar coverage in consumers’ hands rather than the healthcare insurance industry’s hands. The trust account would serve as an economic incentive for consumers to become wise shoppers for medical care and for them to be responsible for their own wellness. What was not spent of the first $6,000 would be in consumers’ retirement account rather than in an account for future healthcare expenditures.

Consumers would force providers to be innovative and compete for the consumers’ healthcare dollars just as Wal-Mart, Target, and Amazon do. Government’s position should be to provide appropriate consumer education to protect them and become informed shoppers for their healthcare needs.

There are several new innovative practice and healthcare insurance systems being developed by physicians that will reduce the cost of care by marginalizing the healthcare insurance industry’s influence and control over the healthcare system while reducing physician overhead.

I will discuss some of these innovative practice and healthcare insurance systems in the near future.

President Obama is willing to spend 1 trillion dollars over the next ten years to repair the healthcare system in addition to the many billions President Obama has secured in the hastily prepared “economic stimulus package.” It is money that will be wasted because his healthcare reform package can only increase healthcare complexity and decrease access to care. It will also increase the healthcare industry’s profit at the expense of medical care to consumers.

Consumers should be motivated to be in charge of their healthcare needs and expenditures. President Obama’s healthcare team thinks a large and inefficient bureaucracy will do it. He has only to look at the failed system in Massachusetts.

Everyone agrees that Medicare and Medicaid have failed. Seniors, in general, are satisfied with Medicare coverage until they have to pay all the deductible costs.

Some are able to cover the deductible costs with additional insurance (Medigap or Medicare Advantage) coverage. The premiums for Medicare are high with the upper limit for full coverage being $15,000 a year. The cost of the Medicare premium is not noticed because it is taken out of their social security payment.

The premiums with coverage for deductibles and drugs can vary from $3,000 per persons to $7,500 per person with after tax dollars. Seniors are all means tested by direct communication between the IRS (tax returns) and Medicare.

Despite high premiums the government has to subsidize healthcare costs at an unsustainable rate. New innovative delivery of healthcare is essential in order to deliver healthcare at an affordable cost, universally, and with increased quality.

Expanding the Medicare system to all citizens will simply make the deficit worse. The CBO estimates that in 40 years the yearly deficit will increase by 100 trillion dollars with the present healthcare system.

There are ways to accomplish President Obama’s goals. The system has to be simplified. Consumers have to be in control of their healthcare dollars and be responsible for their health. President Obama’s healthcare reform plan will make consumers more dependent on government and healthcare more expensive.

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

Stanley Feld M.D.,FACP,MACE

In response to my last post I received this note.

“Stan

This is interesting.  You may like this but it is very obvious that it is just another stall tactic.  If the current bill, with reconciliation, passes, we still have to address these points.  So where are this fellow’s solutions?”

I watched President Obama’s town hall meeting in Grand Junction on Saturday evening. He is a compelling and seductive speaker. If I thought his plan would work and at the same time be budget neutral I might be seduced.

It will not work for the consumer and it will not be budget neutral. He needs a better plan.

What is missing?

President Obama’s generalities are correct. The country needs a system that provides universal care at an affordable cost and an increase in quality. I believe his strategy is wrong. His strategy is reflected in his healthcare reform bill.

He is correct in pointing out that the healthcare insurance industry controls the healthcare dollar. His prescription to destroy the healthcare insurance industry is wrong because it will penalize patients. President Obama’s healthcare reform bill is not doing anything to limit the healthcare insurance industry 20% gross administrative fee whether we have a single party payer or a private insurance system.

He promises to get rid of the waste in the system. He claims eliminating the waste will pay for two thirds of the 1.1 trillion dollars his healthcare billion will cost in the next ten years. The remainder will be paid for by taxing people making over $250,000 a year. He needs to redo the math.

President Obama’s system sounds pretty simple. However, it seems the government hardly ever does anything efficiently. The costs are always underestimated. There are always uncontrolled abuses or unintended consequences.

President Obama is ready to create a massive new bureaucracy and employ approximately 110,000 new employees. Bureaucracy is always a prescription for inefficiency.

President Obama is ignoring the waste created by defensive medicine. The total cost of unnecessary testing is about $750 billion dollars a year. Nonetheless, tort reform is off the table. Defensive medicine is blamed on physicians wanting to generate more money for themselves. I think defensive medicine came first, and then physicians figured out how to generate more income in response to decreasing reimbursements for their services and an increase in malpractice lawsuits. Placing a cap on malpractice awards destroyed the malpractice business in Texas and California.

Where is the role of patients’ responsibility for their own health and healthcare. Patients with adequate healthcare insurance are satisfied. The healthcare inflation problem is the result of medical care costing little for the patient with insurance except for the deductibles.

Our healthcare system is a fix the sick system. The healthcare system is not geared to prevent an illness. The administration’s healthcare reform plan speaks of prevention but does not provide incentives to patients or physicians to prevent illness or even deal with the obesity epidemic..

“Consumers are receiving quality medical care at little direct cost to themselves. This creates runaway costs that have to be addressed. But ill-advised reforms can make things much worse.”

The public has no great love for the healthcare insurance industry. Their protests about the healthcare reform bill are not to protect the healthcare insurance industry. It is to protect their freedom of choice. The public does not trust the government to make choices for them.

Both political parties have extremely low approval ratings. President Obama’s approval rating is sinking because of the perception of his half truths and a mounting distrust by independent voters.

“An effective cure begins with an accurate diagnosis, which is sorely lacking in most policy circles. The proposals currently on offer fail to address the fundamental driver of health-care costs.”

President Obama’s public option and increase in bureaucratic decision making is not going to solve our healthcare systems problems. He is not focusing on repairing the perverse incentives that are presently in the dysfunctional healthcare system.

Consumers must solve the healthcare system problems just like they solved the auto industries problems. Government role should be to provide the appropriate regulations to level the playing field.

“The health-care wedge is an economic term that reflects the difference between what health-care costs the specific provider and what the patient actually pays. When health care is subsidized, no one should be surprised that people demand more of it and that the costs to produce it increase.”

The solution is not a public option or a single party payer system. Consumer driven healthcare is the solution through the use of the ideal medical savings account.

“To pay for the subsidy that the administration and Congress propose, revenues have to come from somewhere. The Obama team has come to the conclusion that we should tax small businesses, large employers and the rich.”

President Obama’s plan will not work because the health-care recipients will lose their jobs as businesses can no longer afford their employees. The economy will get worse and the wealthy will flee to tax havens.

General anxiety will increase, patients will get sicker and the healthcare system will be overused creating more debt and more taxes.

A few economic self evident truths are:

1. A free marketplace with appropriate rules encourages innovation and productivity.
2. In the United States profitability is a strong market driver. If inappropriate rules are set up entities will try to figure out how to benefit from the rules to the disadvantage of others.
3. The higher the taxes the lower the productivity. The lower the taxes the higher the productivity.
4. The greater the bureaucracy the lower the added value productivity.
5. Consumers will try to maximize their purchasing power.

“According to research I performed for the Texas Public Policy Foundation, a $1 trillion increase in federal government health subsidies will accelerate health-care inflation, lead to continued growth in health-care expenditures, and diminish our economic growth even further. Despite these costs, some 30 million people will remain uninsured.”

Rather than expanding the role of government in the health-care market, Congress should implement a consumer driven approach to health-care reform. A consumer driven approach focuses on the consumers being the policemen for their own healthcare dollar. If would focus on the doctor relationship and empower the patients and their physicians to make effective and economical choices.

The patients would be proactive rather
than passive. The result will be an increase in efficiency in the healthcare system rather than a further decrease.

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