Stanley Feld M.D., FACP, MACE Menu


How To Win A War; Don’t Show Up


Stanley Feld M.D.,FACP,MACE

A reader responded to my last blog, Why ACOs Will Fail, with the following comment.


Let's keep our objections as simple as possible, so we can explain them better. The ACO's are a form of capitation. Why should doctors be at any financial risk for performing a service that the government and the public feel is absolutely necessary? 


 R.M. M.D."

The point I made was that the only way to repair the healthcare system is if patients are responsible for their healthcare dollars and for the maintenance of their health. Patients with the appropriate education with will force the healthcare system to be competitive (Consumer Driven Healthcare).

It is naïve to assume that physicians and hospital systems are interested in taking risks for patients’ behavior.

HHS head,Kathleen Sibelius, does not think I am correct according to her news release;

Changing the way we pay hospitals will improve the quality of care for seniors and save money for all of us,”

Under the ACO initiative, Medicare will reward hospitals that provide high-quality care and keep their patients healthy.”

 Dr. Donald Berwick CMS chief wrote in a Wall Street Journal op-ed;

We announced another effort that will reduce costs by improving care: a proposed set of rules for doctors, hospitals and other providers who want to work together as Accountable Care Organizations, or ACOs. ACOs will coordinate better care for patients, improving communication and reducing duplicative tests and procedures that hassle patients and do them no good at all.

The ACOs will be held to a strict set of quality standards to ensure that they aren't lowering costs by cutting necessary care.”

The initial results from Medicare’s one year pilot studies of 10 Medicare Physician Group Practice sites and five Dartmouth/Brookings sites demonstrate the majority of the savings occurred from outpatient services and not inpatient services.

The sites in the pilot have not achieved the level of saving to share with Medicare.

CMS hopes 75 to 150 groups will apply and qualify as an ACO. The startup investment and first-year operating expense for a participant in the Shared Savings Program is estimated by CMS to be about $1.75 million per ACO. Many say this estimate is low.

CEO of the large hospital systems and group practices are starting to understand the financial trap ACO’s represent.

 I think there’s a very high bar that’s set in these regulations,”  says Thomas Graf, MD, chairman of Community Practice Service Line for Geisinger Health System in Danville, PA.

 “They’re very detailed, and somewhat prescriptive, although there’s a mention that if there’s an alternate idea, and you can show how your proposed alternative meets these goals, they would consider it. 

The Geisinger Health System, one of the 10 Physician Group

Practice demonstration sites plans to stay with the PGP model for another two years, especially since the new rules for the second portion of that program were just released.

Dr. Graf also notes that some organizations will have to endure a

25% withhold, which means that in order to make sure new ACOs

are able to manage any losses, they’ll retain one-quarter of shared

savings. “To the extent you’re a startup ACO, you have to put in

costs now, presumably something to improve the care that you’re

delivering on both the quality and cost side. You incur costs on

Day 1”.

Dr. Graf explains: “Let’s say that in the first year, you qualify for

shared savings of $2 million. [CMS says] we’ll pay you $1.5 million

and we’ll retain half a million in case in the second year you have

$300,000 of losses, which will come out of the $500,000.” 

 CEOs are realizing that an effective plan must include smaller organizations. Local markets must be represented because all medical care is local. The hospital system CEOs also are beginning to recognize that patients must be central to determining their own healthcare needs. Consumers must be responsible for their own care for a healthcare system to be effective.

Craig Samitt, MD, president and CEO of Dean Health System in Madison, WI. says, 

There are many complexities and process-based requirement in ACO s.”

Large investments will be needed for most organizations to be high-performing ACOs”

Some don’t think ACOs equitable or practical. ACOs will not

know which Medicare beneficiaries they will be judged on until at

least a year after the program is under way.

Many have expressed concern that there just isn’t enough time between now and Jan. 1 for the final regulations to come out. There is not enough time for them to apply and be approved. It will be impossible for them to have all the pieces in place for a highly functioning ACO.

Chris Van Gorder president and CEO of Scripps Health expressed that concern, among others. “The government is trying to put a politically correct managed care

system of healthcare together requiring the hospitals or the ACO to assume both financial and quality responsibility for patients without even letting them know who those patients are prospectively.”

Chris Van Gorder says “he’ll hold his system back from applying for

Medicare ACO status unless the regulations undergo significant

change.” “Frankly, I was surprised. I thought there would be more

carrots, not so much stick.”

He emphasized that rather than this flawed ACO model, CMS would get better results by expanding bundled payment incentives to include hospital care. “That will get faster and maybe better results than by trying to push the ACO too fast.”

He also says that “he was quite surprised the regulations

impose a penalty for lack of performance on cost controls “right

at the beginning of this grand experiment. That was expected

over time, but [not] for a startup program that is extremely

complicated and far-reaching. One would have thought the

feds would have done all they could to attract and incentivize

healthcare providers and suppliers to take this risk.” 

That sentiment was echoed by Richard A. Hachten II, president

and chief executive officer of Alegent Health in Omaha, NE.

“It’s appropriate that we’re going to be managing people’s

health differently going forward; it’s the financial risk part of it

and not being able to do that as effectively as one could if you

knew which patients you were working with, and could do a more

effective job in coaching the use of healthcare resources,” he says.

“So we think there’s a significant amount of unmanageable risk

built into the way it’s set up currently.”

Jay Cohen, MD, executive chairman of Monarch Healthcare in Orange County, CA says;

The negatives on the flip side outweigh the positives in the proposed regulations, and may prevent his organization from opting to be an ACO. “The way the proposed regulations are written will not work.”


George Halvorson, chairman and chief executive officer of

Kaiser Foundation Health Plan and Kaiser Foundation Hospitals,

which has 8.8 million members nationally, says his system does

not plan to apply and will stay with prepaid Medicare Advantage.

Kaiser, he says, already has a much more advanced team approach to care that goes beyond the four walls of the system. “We’re already there and we’re giving great care. We’re cutting the number of heart attacks in half; we’re cutting the number of broken bones in half.” 

There you have it. “The Art Of War”. The healthcare organizations Dr. Donald Berwick was depending on are not going to show up to his ACO party.

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







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