Stanley Feld M.D., FACP, MACE Menu

All items for September, 2011


Aligning Incentives Is A Must In Creating An Efficient Healthcare System

Stanley Feld M.D.,FACP,MACE

 Mechanism Design has demonstrated that the most efficient systems are created when everyone’s vested interests are aligned.


“An example is defense contracting. If you agree to pay on a cost plus basis you have created incentive for the contractor to be inefficient.

The defense contractor will build enough extra into a fixed price system to account for cost overruns.  The cost overrun would be permitted in the rules if the price was transparent. If there were no cost overruns the contractor’s profit would be increased. It would provide incentive to be efficient.

 “If you agree to pay a fixed price, you can come close to an efficient price if you have all the truthful information.”

A reader wrote’


History has proven over and over again that only the market mechanism of willing sellers and willing buyers is the optimal way to allocate economic resources. This presumes an informed buyer, and a willingness of sellers to compete for buyers. Adam Smith was clear on this in the Wealth of Nations.

If incentives are aligned and truthful price information is available an efficient system is created.  Most stakeholders think they can do better by not sharing truthful information. If the rules of the game require truthful information the system can become an efficient market driven solution.

The healthcare system must become market driven. At present the healthcare system is an artificially distorted free market system. Government intervention has distorted and made the free market inefficient.  

The distorted free market has led to higher prices.

The concept of Pareto efficiency implies one stakeholder has to yield something which makes another stakeholder better off. The reality is in an efficient system the first stakeholder is worse off than he/she theoretically could be.

The first stakeholder yielding makes him/her better off than he/she is but still worse than he/she could theoretically be. The temptation is to not be truthful in order to maintain dominance at the expense of others.

 Leoid Hurwicz observed as others had that the dispersion of information was at the heart of the failure of a planned economy. He observed that there was a lack of incentive for people to share their information with the government truthfully.

 The free market mechanism was far less afflicted than central planning bureaucracy by such incentive problems. The free market economy was by no mean immune to this defect.

He observed that the free market economy can get us closer than central planning to incentive compatibility because the end consumer can drive the discovery of truthful information.

This can explain the power of my Ideal Medical Savings Account.

Consumers creating rules of engagement in a market driven economy can get closest to ideal Pareto efficiency. Since customers determine success of an enterprise by creating demand in a transparent environment, they can get closer to an efficient system.

Consumers can create the rules of the game for compatible incentives. Consumers must have the appropriate financial incentives to maintain their health. They must also own their healthcare dollars.

The government should help consumers design the rules of the game and then get out of the way. The rules should be designed so the patient is first. 

At present the insurance industry is taking advantage of the patients, doctors and hospital systems. The hospital systems are taking advantage of the patients, doctors and insurance companies. Doctors are taking advantage of the insurance companies, hospital systems, patients and the government. The government is taking advantage of the hospital systems, the doctors and the patients. Everyone is pursuing his or her own vested interest at the expense of other stakeholders.

 The insurance companies take advantage of employers.  The drug companies are taking advantage of patients and unduly influencing physicians.

In our healthcare system everyone is pursuing his vested interest in a game that has rules that do not lead to “incentive compatibility.”

Some politicians think central planning can result in producing effective rules and appropriate controls.

Historically, central planning has not worked. 

Before effective healthcare reform can take place, rules acceptable to all the stakeholders must be in place. Stakeholders must create price transparency and understand the value of compromise.

It must be understood why it is important that consumers drive the healthcare system and not the central government. Only consumers can create an undistorted efficient market driven system.

Consumers have to have be empowered and given incentives to align all the stakeholders’ incentives. The best and easiet program to achieve this goal is my ideal medical saving account.

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



  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.


How To Manage Complexity?

Stanley Feld M.D., FACP, MACE

 Complex systems are the result of interactions of experiential learning system and complicated learning systems. Complicated learning systems are created by scientific innovation. Managing the interaction effectively results in efficiencies and success.

On November 11,2007 I wrote about Mechanism Design and the Healthcare System. This Economic Theory won the Noble Prize that year. Few people have ever heard of the theory of Mechanism Design.  

Many of the stakeholders in the healthcare system have some excellent ideas. I would include Dr. Donald Berwick and President Obama on that list.  Problems usually arise from conflicting ideology and method of managing the complexity of competing ideologies.

The key is to align all the stakeholders’ vested interests in a fair and equitable way. It is important for all the stakeholders to agree with the method of managing the complexity created.

It is important to start a sensible discussion on how to Repair the Healthcare System. President Obama has a very difficult time the forcing adaption of his plan to Repair the Healthcare System because of conflicting ideologies.    

The managing of the healthcare system and it many complicated parts have to be approached in a different way.

 The key question should be who is the healthcare systems customer?

The people are the customer. President Obama’s believes the central government is the customer.

Consumers and physicians believe President Obama’s Healthcare Reform Plan is punitive. President Obama has disregarded their views.

I wrote in 2007,

“Last month the Nobel Prize in economics was awarded to Leoid Hurwicz, Roger Meyerson and Eric Maskin . They were awarded the Nobel Prize for developing the economic theory of “Mechanism Design.” My first reaction was “what is that?”

After some research I realized the power of Mechanism Design. It is a brilliant economic theory that could solve many of our economic problems. Mechanism Design applied to our healthcare system could solve most of the dysfunction.

What is it? “ In economics, mechanism design is the art and science of designing rules of a game to achieve a specific outcome, even though each participant may be self-interested.

Everyone in a free country tries to defend his/her vested interest. It is noble to defend the vested interest of others. Unfortunately, it does not work in reality. Rules can be constructed to serve all the stakeholders vested interest with consumers being the key stakeholder.

 Setting up a structure in which each player has an incentive to behave as the designer intends does this. The game is then said to implement the desired outcome. The strength of such a result depends on the solution concept used in the game. It is related to metagame theory, which is the theory of games the playing of which consists of developing the rules of another game.

This is a complex thought. If the rules of the metagame are impossible to comprehend, follow or are total opposed to the participants’ vested interest the fallback position is the rules of the first game.

Mechanism designers commonly try to achieve the following basic outcomes: truthfulness, individual rationality, budget balance, and social welfare.

This should be the goal of everyone in a rational society.

 However, it is impossible to guarantee optimal results for all four outcomes simultaneously in many situations, particularly in markets where buyers can also be sellers

A rule to the advantage of the seller can be a disadvantage to the buyer. The stakeholders need to figure out an appropriate tradeoffs.

 Thus significant research in mechanism design involves making trade-offs between these qualities.

The tradeoffs can be reasonable. They must be shown to be to the advantage of all the stakeholders.

 Other desirable criteria that may be achieved include fairness (minimizing variance between participants' utilities), maximizing the auction holder's revenue, and Pareto efficiency. More advanced mechanisms sometimes attempt to resist harmful coalitions of players.”

Pareto efficiency can be understood in the following graphic.

  Parero efficiency

 In essence when stakeholders are fighting neither B or C neither wins nor achieves total victory. The result is approximately position A. If managing complexity can convince both B and C they would be better off in position D the system has aligned incentives. Both are better being at position D.

 “Looking at the Production-possibility frontier, shows how productive efficiency is a precondition for Pareto efficiency. Point A is not efficient in production because you can produce more of either one or both goods (Butter and Guns) without producing less of the other. Thus, moving from A to D enables you to make one person better off without making anyone else worse off (rise in Pareto efficiency). Moving to point B from point A, however, is not Pareto efficient, as less butter is produced. Likewise, moving to point C from point A is not Pareto efficient, as fewer guns are produced. A point on the frontier curve with the same x or y coordinate will be Pareto efficient.”

Lodi Hurwicz contributed the idea of incentive compatibility. His point is the way to get as close to the most efficient economic outcomes is to design mechanism in which everyone does best for himself or herself. He says this can be achieved by sharing information truthfully (Price Transparency). It is easy to understand that some people can do better than others by not sharing information or lying.

Truthful information (Price Transparency) is a huge issue in the healthcare system. Hospital systems, physicians, drug companies, pharmacies, the healthcare insurance industry and the government hide behind the opacity of information.

There is a mutual distrust among stakeholders.

This mutual distrust must be overcome and price transparency achieved before any progress can occur.

Everyone claims they are afraid to be sued because of regulations. Tort Reform and regulation simplification is a must for price transparency.

If everyone’s incentives are aligned you have a much more efficient economic system. An example is defense contracting. If you agree to pay on a cost plus basis you have created incentive for the contractor to be inefficient.

 I you agree to pay a fixed price you can come close to an efficient price if you have all the truthful information. If you do not you have a fixed price and price transparency with incentives aligned, you create the incentive to be overcharged.

 The fixed pricing in healthcare must be flexible for all stakeholders. All the variables cannot be controlled during a disease process.

The variables are the patient’s responsibility for their own care, the skill of physicians to guide that patient's care and the ability to communicate information (Technology/ electronic communication) with patients and other stakeholders to increase the efficiency of the first two variables.

Most people can do better by not sharing truthful information. If the rules of the game require truthful information you can get close to an efficient market driven solution.

At present there are several impediments to ideally increasing efficiency. In fact, the incentives are present to decrease efficiency. There are numerous examples where central control has not increased efficiency.

Patients are the consumers of healthcare. Consumers must drive the healthcare system. This is the only way to maximize efficiency. 


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


It Is Easy To Forget


Stanley Feld M.D., FACP, MAACE

 It is easy to forget all the promises President Obama made in order to get support his healthcare reform plan.

“If you like your health insurance, you can keep your health insurance.” That was the promise made to millions of Americans by President Obama and leaders in Congress many times in assuring them that the new health law would not disrupt the coverage they have now.”

President Obama will not be able to fulfill this promise because he cannot manage complexity.

The inability to manage complexity results in unintended consequences that lead to more complexity and in turn other unintended consequences.

 I mentioned the importance of developing Learning Systems in my blog, which discussed defective assumptions made to implement of Accountable Care Organizations. A reader asked with “What do you mean by developing Learning Systems?”

 There are three types of Learning Systems.

  1. Experience
  2. Complicated-scientific
  3. Complex –pattern visualization

The first type of Learning System is learning by experience. In medicine, medical students, interns and residents get experience from patients with the guidance of senior physicians. Physicians make future medical and surgical decisions based on this experience.

Sixty years ago the experience Learning System was the only learning system available for the practice of medicine.

As technology advanced and the cost of healthcare increased it was obvious physicians had to systemize healthcare in a scientific way as Deming systematized industrial methods in Japan in the 1950s. This movement led to the need to practice evidence-based medicine.

Systematizing the practice of evidence-based medicine is not easy. Rapid medical discoveries change evidence-based medicine. Medical practice must be prepared for rapid cycle changes.

 This second learning system is known as complicated-scientific. Complicated- scientific learning must be combined with experience learning to be effective.

 The success of evidence-based medicine is grounded in principles common to engineering. In the Learning Healthcare System envisioned by the Institute of Medicine's (IOM) Roundtable on Evidence-Based Medicine, evidence emerges as a natural by-product of care delivery, which is thoroughly documented, pooled for continuous monitoring and analysis, integrated with insights from related studies, and fed back seamlessly to improve the consistency and appropriateness of care decisions by clinicians and their patients.

The third type of Learning System is the development of the abilities to visualize and manage complexity many interacting systems.

 Complexity management is the ability to visualize the patterns of interactions created by the various systems in order to align stakeholders’ vested interests.

 Peter Senge’s “The Fifth Dimension” and my brother Charlie Feld’s “The Blind Spot” have recognized the importance of managing complexity by pattern recognition. Pattern recognition is visualizing the interplay of experiential learning and complicated scientific learning. The visualization can lead to a shift in thinking and strategy among stakeholders. When patterns are recognized it can lead to the avoidance of conflict and unintended consequence.

It is vital to the success of all disciplines in the 21st century.

 Political systems are comprised of both experience and social scientific learning systems. President Obama has ignored the complexity developed by these interacting systems. By ignoring pattern recognition of complexity he has created unintended consequences that are destroying his agenda for healthcare.

Perhaps this is intentional and his goal is to destroy the healthcare system. The void could then be filled with his Public Option and complete government control of the healthcare system.

 This brings us back to President Obama’s promise to the American people. “If you like your health insurance, you can keep your health insurance.” 

Most large companies thought they would be able to keep the present healthcare insurance for their employees. In fact, many employers believed President Obama’s assurances that their health plans would be “grandfathered.” This promise was a key reason leading to their support or to their taking a neutral stance on passage of his healthcare bill. 

Employees valued their health coverage. They were not opposed to Obamacare. Surveys showed that 88% of Americans were satisfied with their health coverage. 

As soon as both employer and employee realized that President Obama’s assurance was not going to be fulfilled most opposed Obamacare.

The grandfathering rules are severe. Employers cannot make changes to their health plans to remain grandfathered.


• Cannot significantly cut or reduce benefits.

 • Cannot raise co-insurance charges.

 • Cannot significantly raise co-payment charges.

 • Cannot significantly raise deductibles.

 • Cannot significantly lower employer contributions.

 • Cannot add or tighten an annual limit on what the insurer pays.

 • Cannot change insurance companies. (This rule was later amended to allow employers to switch insurance carriers as long as the overall structure of the coverage does not violate other rules.

Employers will be forced to comply with expensive Obamacare regulations that increase their health costs further to maintain healthcare insurance.

 Most employers had to make major modification to their healthcare plans such as increasing deductibles to keep their healthcare insurance costs down. These companies are no longer eligible for grandfathering. It is much cheaper for them to pay the penalty than comply with the rules and provide healthcare coverage.

 The healthcare insurance industry increased premiums by 15-39% in order to comply with rules such as providing insurance to children up to age 26, insuring everyone on the group plan regardless of preexisting conditions and not rescinding coverage after enrolling a participant  

 This is an example of not managing complexity effectively.

 On top of all that President Obama issued new limits on insurance coverage. In 2011 the limit must be at least $750,000 per enrollee. In 2012, the limit will have to be at least $1.25 million, and in 2013, $2 million. In 2014 there is no limit on payouts for any individual’s care.

No one will be able to afford to provide healthcare insurance coverage especially the federal government.

The restrictions have led to President Obama issuing 1,578 waivers from Obamacare. The waivers primarily cover limited benefit plans offered by employers and unions who said the higher cost could force them to drop insurance coverage. This is another unintended consequence.

These regulations have increased business uncertainty. It has also increased mistrust of President Obama.

 The most significant unintended consequence is hesitation on the part of companies to create jobs.  

Health costs are directly related to creation of new jobs. Employers continue to face a fragile economy. Higher health costs put additional pressures on companies’ bottom lines. It increases the cost of hiring new workers and in turn discourages job creation.

 This is bad news for President Obama, the economy and unemployed workers. 

 All of the unintended consequences are a result of President Obama and his administration not understanding patterns of systems interaction. It has resulted in not managing complexity of complicated systems and increases in unintended consequences.

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

  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.


Does Medicare Have The Claims Data To Get The “Crooks”?

Stanley Feld M.D., FACP,MACE

I have opposed Medicare’s use of claims data to evaluate the quality of medical care. Quality medical care is the goal that must be achieved. However, no one has described the measurement of quality medical care adequately.

Physicians recognize when other physicians are not performing quality medical care. Physicians recognize when another physician is just testing and performing procedures to increase revenue.

These over testing physicians are a small minority of physicians in practice.

Quality medical care is not about doing quarterly HBA1c’s on patients with Diabetes Mellitus. Quality medical care is about helping patients control their blood sugars so their HbA1c becomes normalized. It is about the clinical and financial results of treatment.

The clinical and financial results depend on both patients and physicians. Patients must be responsible for managing their intake of food, exercise and medication. Physicians are responsible for choosing the right medication at the most cost effective prices and teaching patients how to control their intake and their exercise. This can be accomplished by a team approach with the physicians Diabetes Management team. The patient must be at the center of the team.

Medicare’s medical claims data does not provide this connection of the clinical information with the financial information.

I am not opposed to the use of claims data in identifying physicians, hospital systems and hospice or home healthcare organizations potential fraud. Potential fraud can be spotted by medical claims data by recognizing outliers.

The Wall Street Journal, in conjunction with the nonprofit Center for Public Integrity, attempted for nearly a year to obtain a Medicare database, the Carrier Standard Analytic File. The database contains 5% of all beneficiaries, and includes all doctor claims that Medicare paid directly in association with their care.

 It focuses on doctors and others paid on a fee-for-service basis.

The Journal and CPI wanted the data at no cost under the freedom of information act. The government wanted $100,000 for eight years of data. The Wall Street Journal and the Center for Public Integrity sued the government for the data.

The Journal and CPI obtained the requested data at a substantially reduced price and agreed not to name individual physicians or patients.  

The government lost a lawsuit to the AMA in 1979 and had been required to keep secret monies paid to individual physicians by Medicare. The AMA has continued try to defend this ruling, 

The government is not barred from revealing the monies paid to hospitals, hospices or home healthcare agencies. This information about hospital, hospices and home healthcare agencies is difficult to come by.

Former House Speaker Newt Gingrich has been screaming for years that the database should be public as long as patients’ and physicians’ identity is kept confidential. "Our estimate is that the federal government, in Medicare and Medicaid alone, loses between $70 billion and $120 billion a year to crooks. You ought to be able to identify those."

 "It's very hard to defend ignorance and willful hiding of data in the 21st Century,"   

Newt Gingrich estimates that physicians are the biggest crooks in the system. If we lived in a price transparent ecosystem, we would be able to tell if he is correct. It would be important to know which stakeholder (physicians, hospitals, hospices, and home healthcare organizations) abuses the system the most.

The Wall Street Journal and the Center for Public Integrity in studying the database made available to them found government records suggesting one family practitioner in New York City collected more than $2 million in 2008 from Medicare.

According to experts who have examined her records, her pattern of billing strongly suggests abuse or even outright fraud, She consistently performed wide array of expensive tests that suggests she has been overcharging and over testing.

 The procedures included polysomnography sleep analyses, nerve conduction probes and needle electromyography procedures. She is a doctor of osteopathy certified in family practice as well as hands on treatment called “manipulative therapy."

Eighty-nine percent of her patients received 29 tests. Fifty-six per cent of her billing came from these 29 tests. 13.1 procedures cost $2,048 each.  The antifraud authorities have flagged her for special scrutiny.

I found something strange about these numbers. Medicare only allows a certain number of dollars for certain tests. Medicare does not reimburse the tests that are not approved for certain diseases. I do not know anything about “manipulative therapy” except that it is an alternative therapy that is based upon manipulation and/or movement of one or more parts of the human body

I assume that Medicare approved this therapy and approved the charges for these tests since Medicare paid for them. Procedures and laboratory tests must be correlated with approved diagnoses. This physician might have a large manipulative therapy practice doing approved testing. She has figured out a system to generate a good return within the rules of the system.

The real issue should is not discussed. Did Medicare make a mistake in approving payment for this treatment and these tests? If so, the tests and treatment should not be approved nor paid for by the government.

The physician administrators at Medicare who approve these tests, procedures and treatments are sharp people. They use evidence-based medicine to make reimbursement decisions.

There are reasons to suggest there is more to this story than meets the eye.

 Never the less it is an example of how the Medicare outcomes medical database can be used to discover outliers. After the outliers are discovered, appropriate investigation must be done to discover why the physician is an outlier.

The real problems to be solved are ending the added cost of defensive medicine through tort reform and ending the additional costs of retesting by physicians and hospitals. .

President Obama has done nothing to decrease these billions of dollars in additional cost that add little value to patient care.


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





  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.


What Are The Defective Assumptions Made For ACO Implementation?


 Stanley Feld M.D.,FACP,MACE

 It is going to be very difficult for physicians and hospital systems to develop integrated medical delivery systems in the present time frame.

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 two 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.

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."

Below are some of the defective assumptions made to implement ACOs.

Physicians and hospitals have little experience or control in managing risk. The experience with HMO’s in the 1980’s proved their inability to manage risk. 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 predict participation will be minimal. Those who participate in the ACO program will fail.

Healthcare policy should focus on how policy can provide incentives for patients to be motivated to control their own healthcare risk.

 The implementation of electronic health records will be more challenging than President Obama and Dr. Berwick believe. The financial support from President Obama’s stimulus package is going to turn out to be a waste of money. The EMR’s cost more than the government subsidy.

 EMR installation disrupts medical practices for at least six months. The incompatibility of information systems can only be overcome at great expense to both hospital and physician.

President Obama should be spending the stimulus money on the Ideal EMR. It would cost physicians and hospitals nothing. They would pay by the click. It would unify all the information systems nationwide. The Idea EMR would remove many of the barriers to achieving the goal of integrating medical data.

  Data measurement imposes another difficult barrier to implementation of ACOs. I have wondered what date U.S. News and World Report used to name Parkland Memorial Hospital among the 100 best hospitals in the nation while Center for Medicare and Medicaid Services (CMS) used other data to disqualify Parkland Memorial Hospital from collecting Medicare and Medicaid reimbursement. I believe Parkland is a great hospital with a great CEO, Dr. Ron Anderson. Someone’s data is wrong.

  Can physicians and hospital systems trust CMS to measure their performance and pay for performance based on the data used?

 The challenge of collecting, analyzing, and reporting performance data will be the ACOs responsibility. CMS will evaluate the data collected and determine payment for performance.

 Most ACOs will have difficulty developing the data and reporting capability with present EMR capabilities.

  A goal of ACOs will be to implement standardized care management protocols. If successful it will commoditize medical practice. It will eliminate physicians’ judgment. It will destroy the patient-physician relationship.

I believe all physicians should practice evident based medicine (EBM). In the absence of tort reform physicians cannot avoid the practice of defensive medicine.

 ACOs are not designed to align the stakeholders’ vested interests. I can visualize hospitals fighting with their physicians over money distribution and medical care decisions. Payments for medical care are going to be bundled. In order to save money and receive the shared saving bonus, patients may have medical care rationed.

 ACOs are Primary Care Physician(PCP) centric. There is no requirement for specialists to limit their activity to a single ACO. Specialists will be critical to the effective performance of ACOs in order to qualify for the shared savings bonus.

 Who will decide which specialist a PCP will refer patients to? There will be fights about fees to pay specialists. Obamacare’s ACOs make no attempt to align providers’ vested interests. It leaves it up to the providers. Since hospital administrators will control the money fighting is inevitable.

Patients must be the leader of the healthcare team. Obamacare and ACOs make no attempt to put patients in a responsible, leadership position. Patients and family members must participate in managing multiple, complex chronic conditions. Patients need to be taught to manage and take responsibility for their health and health care. They need to be taught to engage their family and have the family participate in medical decision-making.

  Obamacare does not outline systems of care for chronic diseases for the potential ACO that might not have experience in team management.

  ACOs may not have the necessary management and implementation skills required to improve care delivered to patients. Improvement in medical care will require team management of chronic disease. Patients must be the leader of their team. This will require aligning shared interests and rewards among the different providers. This is where physicians and hospitals will lock horns.

New regulations have to be coordinated with the Stark anti- kickback legislation. It will require costs that have nothing to do with direct patient care.  Compliance with new regulatory requirements will require unprecedented and unmanageable levels of transparency and cooperation among hospital systems, physician organizations, and the payer.

 There is too much emphasis on central data collection and managing the data. Much of medical management depends upon on the spot clinical judgment.

 Learning systems must be built to have rapid cycle improvement in quality care.  I suspect many physicians and hospital administrators do not know the importance of learning systems.

 Developing cooperation among all the stakeholders to develop preventive medicine systems and systems of care for chronic disease does not develop overnight, especially when payment for those services are vague.

 These are just a few of the defective assumptions made by President Obama and Dr. Don Berwick that will prevent ACOs’ success.

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




  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.


Obamacare’s Magic Bullet (Accountable Care Organizations) Is Not On Target!

Stanley Feld M.D.,FACP,MACP


As we get closer to January 2012, the originally scheduled implementation date for Accountable Care Organizations (ACOs), the time has come to reexamine the showpiece of President Obama’s Patient Protection and Affordable Care Act (PPACA) of 2010. 

 The final rules for ACO’s are now scheduled for release on January 2012. The implementation was originally scheduled for January 2012. As the original rules are being studied and interpreted the program for ACOs implementation became more confusing. Dr. Don Berwick (CMS Director) has refused to discuss the final rules until they have been published in the Federal Register.

 “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.

 The federal government has big-footed health system reform. Although there is no one right way to organize care, the federal government (Dr. Don Berwick and President Obama) thinks it has found one—and exerts top-down, bureaucratic control through PPACA to implement it.”

 ACOs are supposed to be organizations that improve coordinated care. If an ACO decreases the cost of care the ACO will share the savings with the government with a formula for sharing to be determined by the government. The formula is complicated.

 ACOs will be required to accept responsibility for the cost and quality of care for defined patient populations. The government will define the population not the ACO or the patient. The goal is to prevent the ACOs ability to cherry pick a healthy population.

 ACOs will have to meet targets defined by their previous 3 years of Medicare Part A and Part B experience in order to share savings.

 Here is the first “Catch 22.”

 If an organization such as Mayo Clinic did a great job with its integrated system in the past three years it would have to do better in the next year to receive any savings. Let us say it is not possible to do better because they are so great. The only risk benefit reward for Mayo Clinic is a penalty.

If an organization did poorly in the last three years its upside potential is great if it performs well.

  Qualified ACOs can choose between 2 risk-benefit programs. The first involves upside potential from shared savings in the first 2 years, adding downside risk only in the third year of operation.

 In the second risk-benefit program, ACOs share a greater percentage of the savings with the government but are responsible for downside risk from the onset of the program.

 ACOs’ will be required to conduct quality improvement initiatives, care coordination, measure performance and develop infrastructure to meet government requirements to qualify to continue to be an ACO. The startup costs for a hospital system have been estimated to be $2 million to $12 million dollars.

  Hospitals and physician organizations have had adversarial relationships in the past that have to be overcome. In order for ACOs to have a chance to work, cooperative relationships must be developed between the hospital and physicians. Hospitals will control the money. They must distribute it fairly to physicians. Past behavior is a predictor of future behavior.  Hospitals have not had a successful record in the past of being fair to physicians.

 Systems of continuing quality improvement will have to be developed and implemented. Both physicians and hospitals have not had to deal with these systems in the past. In is not part of the medical care systems’ culture.  They will have to learn to adapt too quickly in Dr. Berwick’s timeline. 

 It will require a fundamental change in the U.S. healthcare system. It is not a bad thing to have systems of continual quality improvement. In my view the medical care system has to grow into it under steady but friendly pressure. The culture cannot be changed overnight. A consumer driven healthcare system can make it happen quickly. A government driven system will not be able to do it.  

 President Obama has stated over and over again that he is all ears for new ideas. Yet he does not listen to new ideas.

 It is an error to try to create a HMO on steroids. HMOs failed once and they will fail again. Many medical outcomes are unpredictable. Physicians and hospitals are not insurance companies. President Obama is trying to shift the risk to physicians and hospitals. Physicians and hospitals are aware of the difficulty. Many are terrified by the potential penalty.

 A recent report listed the 54 worse hospitals in the country as far as readmission rates after discharge in two out of three disease categories. President Obama has recognized some of these worst performing hospitals as having the best-integrated systems.

Among the hospital systems listed are the Cleveland Clinic, Beth Israel Deaconess Medical Center Boston, Barnes Jewish Hospital in St. Louis, MO, Northwestern Memorial in Chicago, University of Massachusetts Memorial Medical Center in Worcester, Henry Ford Hospital in Detroit, Johns Hopkins Bayview Medical Center in Baltimore and the University of Maryland Medical Center in Baltimore.

  President Obama is going to impose a penalty starting at 1% for Medicare DRG discharges and readmissions after Oct. 1, 2012, increasing to 2% after Oct. 1, 2013 and to 3% after Oct. 1, 2014.

President Obama must be reminded that it is difficult to get cooperation from organizations when they are threated by penalty. The development of complicated regulations that cannot be followed and then granting waivers to some and not others intensifies the mistrust and uncertainty felt by the medical community.

Creating new programs must provide adequate incentives not penalties. Penalties do not promote participation by providers.

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






  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.


E-Prescription Final Rules

Stanley Feld M.D.,FACP,MACE

Physician participation in President Obama’s E-Prescription mandate has been poor. Physicians do not like mandates.

The new final rules were published in the Federal Register on August 30,2011, CMS added new "significant hardship" exemptions. The exemption qualifications were broadened. Physicians who qualify for exemptions will not be penalized starting January 1, 2012.

CMS also agreed to extend the application for exemptions one month until November 1,2011. The number of physicians who qualify for bonus has not been published. The number of physicians vulnerable for penalty has not been published. CMS hopes that many physicians will apply for the exemption.

In an August 10, 2008 blog post I warned that the E-Prescription program as written would not work as outlined.

 I said,

When is congress going to learn that punitive action is not a wise course to pursue against a vital workforce? Real incentives work. Bogus incentives always fail.

My e-prescription plan would provide physicians incentive to use the software because it would be free and driven by their patients demand. 

The U.S. Senate on July 9 passed legislation to revise several Medicare provisions and authorize incentive payments for use of electronic prescribing technology.

Please note the complexity of President Obama’s schedule. Physicians have learned that anything incomprehensible is an administrative trick to reduce reimbursement.

 Therefore, they do not participate. If they do not participate the incentive fails. It is similar to the art of war. You simply do not show up to fight.

The bill calls for Medicare incentive payments for e-prescribing of 2% in fiscal 2009 and 2010, 1% in 2011 and 2012, and 0.5% in 2013. Sec. 132. Incentives for electronic prescribing.

Physicians despise mandates. The questions that arose are:

 2% of what?

Will it cover my cost of installing an E-Prescription system?

What is the Obama trick play here?

Does the government want to develop an easy way of following my prescribing habits so they can reduce reimbursement?

The law

  1. Provides positive incentives for practitioners who use a qualified e-prescribing systems in 2009 through 2013.
  2.  Requires practitioners to use a qualified e-prescribing system in 2011 and beyond.
  3. Enforces of the mandate achieved through a reduction in payments of up to 2% to providers who fail to e-prescribe.
  4.  Prohibits application of financial incentives and penalties to those who write prescriptions infrequently.
  5. Permits the Secretary to establish a hardship exception to providers who are unable to use a qualified e-prescribing system.
  6. Requires more reporting by physicians. The increased reporting consists of any e-prescribing quality measures established under Medicare’s physician reporting system.

“Beginning in 2012, payments to physicians not electronically prescribing would be reduced by 1%, then 1.5% in 2013 and 2% in subsequent years.      

I believe congress is mistaken if they think this will work. It will be costly to the healthcare system and someone other than physicians will make some money. The plan will only generate more mistrust among physicians for the government.”

The old rules were confusing, cumbersome and duplicative. CMS published reasons for the easing of qualifications for exemptions.

 "After we published the 2011 Medicare Physician Fee Schedule Final Rule last fall, we heard about additional circumstances that could keep physicians and other health professionals from being successful e-prescribers," Patrick Conway, MD, chief medical officer and director of CMS' office of clinical standards & quality wrote in a blog post on the final e-prescribing rules.

 "For example," he wrote, "some providers weren't sure whether certified electronic health record technology that the Medicare and Medicaid EHR Incentive Programs require is also a 'qualified' electronic prescribing system as required by the Medicare eRx Incentive Program. [Other] providers brought up additional hardship situations that the 2011 MPFS final rule didn't address."

 The 2012 hardship exemptions in the final rule cover eligible professionals who:

  • Cannot electronically prescribe due to local, state, or federal law or regulation or have limited prescribing activity.
  • Are not a physician, nurse practitioner, or physician assistant as of June 30, 2011 and do not generally have prescribing privileges.
  • Are located in rural areas without sufficient high speed Internet access or in an area without sufficient available pharmacies for electronic prescribing.
  • Additionally, organizations that have already registered to participate in the Medicare or Medicaid EHR Incentive Programs and adopt certified EHR technology do not have to prove that they are successful e-prescribers, since that program already requires meaningful users have e-prescribing capabilities.

 CMS needs the cooperation of physicians. It also needs to save face for conceiving this complex, incomprehensible, bureaucratic mandate.

"The biggest issue was [that] the eligible professionals did not want to have to deal with the payment adjustment for 2012. We think there's an attempt here to do that. Given the current environment, the providers are still feeling squeezed overall. To have them go through the adjustment in 2012 really wasn't fair," she said.

 CMS is attempting to make it easier for providers to apply for exemptions. It has added an online tool to its site. Physician practices, however, still have to submit a written letter by November 1,2011 to receive the exemption..

If congress voted for my Ideal Electronic Medical Record it would avoid the barrier of high cost of physician entry into the program. 

An E-Prescription component could be integrated into the Ideal Electronic Medical Record solving two problems at one time. Logic has not prevailed thus far.

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



  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.


Stop The Demagoguery

Stanley Feld M.D.,FACP,MACE

 Patients are first. Patients are the reason for the existence of the healthcare system. Physicians are second. They are trained to understand the pathophysiology of illness and to treat patients for their disease. Everyone else is a secondary stakeholder (provider).

 All the stakeholders create waste in the healthcare system. If an accurate analysis were performed, most of the waste and the resulting profits would be attributed to the secondary stakeholders. Patient and physicians drive this waste and profits into the hands of the secondary stakeholders. Neither patients nor physicians are aware of driving the waste and profit into these stakeholders’ coffers.

The patient-physician relationship should be a one on one transaction. Patients and physicians are frustrated and many have accepted the disappearance of this human-to-human interaction. 

 Healthcare insurance companies and hospital systems think they own the patients and the physicians. This will turnout to be a fatal misperception.

 To many observers of the healthcare system, there are no simple solutions to fixing the dysfunction. One reader wrote:

“ There are so many contending interests, physicians, patients, hospitals, surgeons, labs, health insurance companies, public funding, et al., there will never be an ideal plan simply because of the tensions that exist between the above actors.”

“This is compounded by the population diversity which impacts ability to pay, willingness to practice preventative health or comply with medical recommendations.  Add into the mix the highly influential emotions that cause patients and their family to make inappropriate or unwise decisions.”

 The dysfunction in the healthcare system is so complex that most people look to blame someone for the dysfunction. The easiest targets are physicians.

  I believe there is a simple way to solve the problems. It is by creating a consumer driven system that provides enough financial incentive to consumers to inspire them to prevent the development of chronic disease, teach them to treat their chronic disease with effective systems of care and provide information on finding physicians who will provide care. The solution has to be driven by individuals responsible for their care.

 A case in point is Kris Carr author of Crazy Sexy Cancer

 “Before finding Dr. Demetri at Dana-Farber, she spoke to four other oncologists. One kept her waiting for three hours, gave her 10 years to live and then abruptly left to see another patient. Another off-handedly suggested a triple organ transplant. But something about the wrongness of it all galvanized a previously untapped drive in Carr.

  “I realized,” she says, “that if I was going to make it through this, I needed to become the C.E.O. of my own healing start-up.” Carr called her imaginary company “Save My Ass Technologies Inc.She began meeting with doctors as if they were applying for a choice job with her.

 Consumers can drive all the waste out of the system. People do not want to believe this because the profit created by the waste is counter to their vested interest. Many health policy experts think consumers are too stupid to find good medical care. It is not that they are too stupid. Consumers feel powerless in the present system.

 Right now the solutions are finger-pointing solutions based on hunches and little evidence.

A physician wrote an editorial in the Bangor Daily News.

 I think my profession collectively has failed miserably to lead on most hot issues of health care reform. It has not, for example, led efforts to get all Americans health insurance, to reduce medical errors, or to reduce waste in health care in order to help make it affordable for us all.


 The statement is meaningless to me. It is grandstanding. The problem is if you tell a lie enough times it becomes the truth. The big question is which testing and which procedures are appropriate to improve well-being.

"Which road will physicians choose when it comes to reducing the number of wasteful procedures they perform and for which they get paid? We do countless colonoscopies, heart catheterizations, MRI scans, joint scopings, office visits and much more that waste billions of dollars and cannot be eliminated without physician leadership of a “whack out the waste campaign.”

 A reader of my blog replied to the statement made in the article in the Bangor Daily News.

I'd like to know who are the docs that are doing all this overutilizing that we keep getting accused of by others, and even by members of our own bunch.  I haven't practiced that way, and I don't know docs who do.  Where are all those miscreants?  I'm wondering if that may be another example of a false statement being repeated so often that it eventually acquires a ring of truth."

In another departure from conventional thinking by the traditional media the same reader continues:

"And, while I'm thinking about it, what can we do with the percentage that healthcare expenditures form of the GDP when the GDP is going into the tank, and healthcare is not?  Doesn't that make the percent for healthcare seem a whole lot larger than it otherwise would be?  Maybe we should be railing away at the people who have allowed our GDP to get to the miserable level it now forms.  Instead of it all being Bush's fault, maybe it is the fault of the unions whose greed drove all those jobs overseas, not to mention the excessive government regulations and taxation of corporations that make disincentives to GDP growth in our country?  Maybe our view of things is narrower than it ought to be.  D"

We should not be satisfied with conventional thinking. Finger pointing doesn’t solve the problem of dysfunction in the healthcare system. What does is recognizing patterns and changing approaches to the healthcare system that serve to align incentives of all the stakeholders without totally disrupting the structure that exists.

The most important stakeholders in the healthcare system are patients. They should control the healthcare system. Consumers should make all the other stakeholders compete for their business. There is too much waste, too many middlemen, too many markups and too much abuse by all the stakeholders.

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






  • Reyna Dugas

    Reyna Dugas

    This is one awesome blog article.Much thanks again. Really Great.

  • Thanks for leaving a comment, please keep it clean. HTML allowed is strong, code and a href.