Stanley Feld M.D., FACP, MACE Menu


The Federal Government and Accountable Care Organizations (ACOs)


Stanley Feld M.D.,FACP,MACE

In 2009 President Obama stated that Accountable Care Organizations (ACOs) were going to be pilot programs in real world settings. The goal was to see if they effective in reducing costs and increasing “quality of care.” The results of the pilot programs have not been published.

Last week despite the lack of proof of concept HHS and CMS announced new proposed regulations for ACOs.

The new delivery and payment model the agency estimates could serve up to 5 million Medicare beneficiaries through participating providers, and also potentially save the Medicare program as much as $960 million over three years. 

How were these estimates derived? It could be another accounting  trick by President Obama’s administration.

The idea of coordinating care and developing systems of care is a great idea theoretically. From a practical standpoint, execution is very difficult.

I tried to execute something similar in 1996 with the American Association of Clinical Endocrinologists; a national Independent Practice Association. AACECare received little cooperation or interest from Clinical Endocrinologists. 

The problem is coordinated medical care is dependent on physicians cooperating and not competing with each other.  It also depends on  hospital systems developing an equitable partnership with physicians.

The equitable partnerships between hospital systems and physicians are difficult to achieve if past results are any indication of future results.

 An important element to the success of ACOs is patients’ use or abuse of the ACO. There are no incentives provided for patients to manage their chronic diseases and avoid complication of those diseases. 

Some of the problems with Dr. Don Berwick’s rules and regulations for ACO’s are:

1.Patient compliance is not considered in the system. Positive outcomes and savings are mostly dependent on patient behaviors and compliance with treatment.

2. ACOs are dependent on hospital systems developing a network of physicians who cooperate to coordinate care.

3. Cooperation between physician and hospital systems depends on mutual trust. The hospital systems will receive and distribute the money received from the government. This is an area ripe for conflict and mistrust.

4. Dr. Berwick does not calculate the role of patients in risk management of their chronic disease.  Patients are the drivers of their medical outcomes.

5. One Medicare and Medicaid check would go to the hospital system to be distributed to physicians. The administration of the ACOs would determine the distribution. This will result in great conflict. The trust issue must be resolved from the onset.

6. Physicians are uncomfortable working for organizations who determine the value of their intellectual property or surgical skills. 

 ACOs’ will have to develop systems to dictate care consistent with government determined evidence based medicine. The government will reward organizations that are successful. It will penalize organizations with poor outcomes. The hope is to increase quality of care and decrease the cost of care.

 The execution will be difficult. In reality ACOs are HMOs on steroids.

The proposed payment formula is difficult to follow. It must be understood in order to appreciate the defects in the system. 

1. Hospital systems will own and control physicians’ intellectual property.

2. Hospital systems’ political decision process will determine pay and distribution. 

3. The federal government will determine what it will to pay the ACOs. This is a major defect given the federal government past behavior in judging the value of physicians intellectual property and surgical skills. As a reason of budget pressure the federal government will be forced to decrease reimbursement.

4. It will be the ACO’s responsibility to come in under budget. If the ACOs come in under budget the excess will be shared 50/50 between the government and the ACOs.

5. Each ACO will have an individual budget based on patient demographics and risk weighting. Risk weight is an imperfect science.

6. ACOs must define the processes it uses to coordinate care. CMS rules outline a range of strategies for ACOs to accomplish this. The processes included must be;

             a. Predictive modeling.

             b. Use of case managers in primary-care offices.

             c. Use of a specific transition-of-care program that includes clear guidance and instructions for patients, their families and their caregivers;

             d. Remote monitoring.

             e. Telehealth.

If any of these processes are lacking or defective in the government’s judgment the ACO will not be eligible to save in any savings.

The payment system is equally frightening under the proposed regulations:

1.ACOs would provide an organization with a separate tax identification number. 

2. Payments would go directly to the ACO’s administration. The ACOs administration would decide on the distribution of those payments to its member providers.

3. The ACO rules would allow ACOs to receive shared savings if they meet both the quality performance standards established by the HHS secretary and their target spending goals.

4.The target spending goals would be set for each ACO by HHS.

5.HHS can also limit or adjust the total amount of shared savings paid to an ACO.

 6. There will be no administrative or judicial review process for determining ACO's eligibility for shared savings. There is no review process for “termination of an ACO” for failing to meet quality performance standards.

7. ACOs can participate under either :

                  a. A model that shares both savings and losses from the beginning of a three-year period or

                  b. shares only savings in the first two years and shares both savings and losses in the last year.

8. ACOs will be required to demonstrate a partnership with Medicare fee-for-service beneficiaries by having a beneficiary represented in the ACO's governing body.

In order for ACOs to share in savings, ACOs would have to meet quality standards in five key areas determined by the government:   

Patient/caregiver care experiences

Care coordination

Patient safety

Preventive health

At-risk population/frail elderly health.

None of these measures are clearly defined. It will become a bureaucratic mess.  The results will compromise medical care. It will promote adversary relationships among and between stakeholders. It will promote dependence on the government’s bureaucratic discretion among stakeholders.

ACOs are much to complicated to work. The further along Dr. Berwick gets in constructing the infrastructure the harder it will be to dismantle it.

I believe this is the reason President Obama’s Justice Department is stalling the appeals process of the challenges to the constitutionality of President Obama’s Healthcare Reform Act.

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.