Stanley Feld M.D., FACP, MACE Menu


Accountable Care Organizations Will Fail !


Stanley Feld M.D.,FACP,MACE

The more I study ACOs the worse they look. Dr. Berwick’s goal is redistribution of wealth. This is exactly what ACOs are going to do. Patients, taxpayers and physicians are going to get the short end of the distribution.

Hospital systems are spending a ton of money trying to form ACOs. They are going to lose big. I have concentrated on the obvious defects and difficulties in forming ACOs in the past. Here are some more traps.

I don’t think anyone has considered the following,

  1. Which consumers will ACOs treat?

Only Medicare patients are included in the ACO program for now. Medicaid and private insurance patients are not included. Medicaid will have a severe physician shortage with increasing enrollees. The result will be greater cost shifting in the private sector. The private sector will disappear. 

     2. How many Medicare patients will be covered?

“ACOs will only care for 1.5-4 million beneficiaries” As of 2001 there were 35 million Medicare seniors and 5 million persons on Medicare disability. The number is estimated to grow the 72 million by 2030.

      3. How will the government decide on reimbursement to the individual ACOs?

Unknown. There have already been indications that the government will individualize ACO reimbursement.

     4. What are the criteria to determine under utilizing or over utilizing ACOs? 

Unknown. Under utilizers are supposed to share the difference 50 /50 or 60/40 with the government and over utilizers will pay the government the difference.

Different ACOs approved can develop different models of organization and payment structures for care as long as it meets the budget and quality goals the government determines.

The government’s thinking is that decentralized accountability and leadership with (monetary) sticks and carrots are likely to produce better results for the whole country than central government rules without the ability to enforce the rules. 

 ACOs which incur too high a utilization or which do not meet the quality targets, may have to forgo reimbursements completely (see patients for nothing) or even pay CMS money back. CMS has placed its emphasis on ACOs beating the reimbursement goals. The government would then share the savings with the ACO. In either case the government wins.

A frightening thought is ACOs can become too big to fail. It would necessitate another government bailout. You can be sure within 456 pages of the rules there are many unintended consequences. There are also ways to beat the system that will be discovered in the future. 

Once again, CMS, HHS and President Obama are trying to fool us with numbers.

CMS hopes that ACOs could save it $170-960 million over three years.” The Medicare and Medicaid budget for three years is $1.8 trillion with Medicare consuming most of the money. The “cost savings” represent only 0.01%- 0.05% of the Medicare budget.  This is a tiny savings.

Can anyone be impressed with the potential cost savings? One should be impressed with how the savings is presented by the administration and how much bureaucracy it will take to set up and implement the system.

The performance measurements (or standardized “metrics”) have not been defined for ACOs. Performance measurements discussed so far have been process measurements. Process measurements do not necessarily lead to better medical or financial outcomes. These process measurements are just a surrogate that assumes better outcomes.

The fact that if an ACO or its physicians do four HbA1c tests per year for the management of Diabetes Mellitus, it does not mean that the medical and financial outcomes will improve. This defect in process measurements applies to many chronic diseases.  The management of chronic diseases and their complication account for 80% of the healthcare dollars spent. 

ACOs must have a minimum size of 5,000 “ Medicare ensured lives”. This is not possible with small practices. The net margin is too small for Medicare to overload a small group practice with 5,00 Medicare patients at present rates of reimbursement. Reimbursement is projected to become even smaller.

CMS has already picked the groups (identified by Dr. Don Berwick’s Institute for Healthcare Improvement) who will qualify for ACOs. They are supposedly low cost/high quality groups. The goal is to create ACOs with integrated healthcare systems who salary physicians. Physicians in those organizations are supposedly used to working closely together. There should be an emphasis on primary care physicians.  The government will then let the hospital systems and physicians fight over dividing the government reimbursement.

 ACOs are not for everyone. If the ACO is fragmented, with weak physician leadership and high usage of independent specialists, it will difficult to have a high-performing ACO. Even if an ACO is low cost and high quality it will be difficult to be profitable as reimbursement is decreased. If Medicaid is added to the scheme hospital systems will fail

The only advantage is that the ACO might be too big to fail. The government will be forced to bail them out.

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








  • Dan

    I think that the ACOs are designed to fail and here is why. ACOs are similar to the PPOs of the 1980s and 90s in which physician groups were formed to “accept risk” from the insurance companies with the hope of a monetary reward and many went bankrupt. Accepting risk makes the physician group whether a PPO or ACO the defacto insurance company. The reason they fail is because the physician can not be both the patient advocate and the insurance company denier of care. If the physician group(ACO) denies care they will be sued and go bankrupt. If the ACO doesn’t deny care they will be penalized for overspending and also go bankrupt.
    When they go bankrupt the government will bail them out, but will take over all their assets, nationalizing the system a piece at a time. A private system will then not be allowed or able to reconstitute. That in my humble opinion is the end game.

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