I wrote, at length, about risk in Bull! A History of Boom and Bust.

Warren Buffet recommended Bull! in Berkshire Hathaway’s annual report.

But I guess Buffett doesn’t understand risk.

And Leon Levy didn’t understand why Long Term Capital Management went down.

“Risk is, by definition, unknown or incalculable.”

LOL sometimes I think you say this stuff trying to be funny and know your not right, I don’t want to imagine any otehr scenerio that you actually beleive what you just said.

The entire insurance industry is predicated on defining and predicting risk. You might not know who will get cancer but you know out of a representiitve population of X you will have 5 cases. You might not know when Matt will pass away but you know the average life expectancy of a 35 year old is 42 years.

A chance of injury or loss doesn’t mean its unknown. They know how many houses will burn down and how many auto accidents there will be. Without this knowledge and control of risk there would be no insurance, they would either be bankrupt or charge premiums so high no one would buy it.

“I’ve written quite a bit about risk in the financial world.”

Writting about it doesn’t mean you understand it, as this comment proves.

“The notion that one can calculate or measure risk with any certainty is what brought Long Term Capital Management Down.”

No Maggie measuring risk had nothing to do with LTCM’s fall, it had everything to do with leverage, tax cheating, and the collapse of Russia.

“To take on risk is to gamble.”

No to gamble is to take risk, one can assume risk with no potential for loss. I have clients that self fund their health insurance becuase there was no chance they wouldn’t save money. They assume the risk becuase they were guaranteed a positive return. I have invested in the stock market with a guaranteed postive outcome.

“Empirical reserach suggests”

To risk multimillion or billion dollar companies on the suggestion of a positive outcome is to gamble. Your ignoring the specific concerns the hospitals had, probably becuase you don’t understand them. Assuming risk on an unidentified population is gambeling. That is the issue they have.

““ACOs pay a penalty to Medicare if costs for their patients increase beyond the levels projected by CMS.” But on the other hand, ACOs would not have sufficient information to determine in advance the population of patients they would have to care for, and the rules do not adjust for changes in the health status of patients or costs beyond control.”

You would need to understand insurance to grasp what they are saying, trust me this is a major problem for someone being asked to bare the liability for this undefined population.

Every population has a predicable cost once you reach a critical size, couple thousand roughly. To predict cost without knowing the populaiton is not possible or the prediction would be of so little value.

“Hospitals would prefer not to be vulnerable to “the unexpected.”

No Maggie, again your speaking for other people, they have no problem assuming liability for patients, I have had the meetings with them. They don’t want to be on the hook at a set price for someone they know nothing about.

“The goal of patient-centered reform is to give hospital CEOs more reason to worry about risks to patients.”

please don’t be so niave, the goal of ACOs is to save Medicare. Without substantial cost reduction the program is going to collapse and take with it the whole new deal/liberal idelogy dogma. Congress doesn’t care about patients they care about patients not costing so damn much.

You write: “sounds like they are afraid of unknown risk”

Risk is, by definition, unknown or incalculable. Dictionary defintion: “a chance of injury or loss.” Chance. . .. A legal dictionary defines risk as “uncertainty as to chance of loss.”

As it happens, I’ve written quite a bit about risk in the financial world. The notion that one can calculate or measure risk with any certainty is what brought Long Term Capital Management Down. (See Leon Levy’s brilliant
The Mind of Wall Street” Levy ran Odyssey Partners, a famous hedge fund.”

See Nassim Taleb’s “Fooled by Randomness” and Peter Bernstein’s “Against the Gods”–the two best studies of risk. As Bernstein points out “the unexpected lies in wait for us.”

To take on risk is to gamble. One hopes to reduce risk. And under the ACA
rules, hospitals are expected to do their best to reduce risk. Empirical reserach suggests that if they practice evidence-based medicine, follow safety protocols, and enlist everyone to collaborate, they can reduce waste adn errors. But their are no guarantees that their profits will increase. They could lose money. That is what “risk” is all about.

Hospitals would prefer not to be vulnerable to “the unexpected.” But the truth is that any patient who enters a hospital is “risking” the unexpected. If chance turns against him, he may pay with his life.

The goal of patient-centered reform is to give hospital CEOs more reason to
worry about risks to patients.

http://www.physicianspractice.com/blog/content/article/1462168/1847448

Erickson. He anticipates between 75 and 125 applications at the onset, with many waiting for best practices to emerge first. ACOs must, however, wait until Jan. 1 of each year to register, although the proposed rule by CMS indicates that there is a “possible” additional July 1 start date to come next year.

So that means, said Erickson, that those jumping in for 2012 — the “sophisticated players” — will likely elect for Track 2, having established their ACOs and partnerships well in advance and willing to take on risk for greater rewards.

http://www.hfma.org/Templates/Print.aspx?id=23532

“Organizations of providers, however, have objected that the potential savings are uncertain, and the rules create too great a risk of loss.”

“It was predictable that hospitals and
some doctors would balk at the idea of taking financial risk.”

These are not the same statements. Balking at the idea of taking risk is not the same as taking on a known loss. If you don’t understand this difference I wonder how you ever reported business.

Insurance carriers take on risk, they will not insure a high risk pool without government subsidy or something to offset the known loss they will take. You did a terrible job reporting what one blogger said, lets look at everything you left out;

“The doctors’ organization said the ACO rules require that “ACOs pay a penalty to Medicare if costs for their patients increase beyond the levels projected by CMS.” But on the other hand, ACOs would not have sufficient information to determine in advance the population of patients they would have to care for, and the rules do not adjust for changes in the health status of patients or costs beyond control. Consequently, ACOs would not be able to “evaluate the nature or magnitude of the down-side risks they would be accepting” or be confident they could recoup the steep “the up-front investments needed to build the appropriate ACO infrastructure.”

Wow that sure doesn’t sound like they are afraid of risk, sounds like they are afraid of unknown risk, as any prudent person would be.

“the American Hospital Association revealed its estimate of the cost of forming an ACO as $11 million to $26 million in the first year, which is 6 to 14 times the government’s $1.8 million estimate of the startup expenses.”

I won’t even go into how much of a joke that 1.8 million figure was, perfect example of an academic having no clue what they are talking about. If your lucky the attorney bill might come in under 1.8 million.

What were you saying about healthcare paying for poor work? Terrible reporting, if you can’t even copy an idea and repeat it….your not creating original thought, you just sharing what others think and you can’t even do that accuratly.

“Since publicatoin of the government’s rules for forming ACOs in April, hospitals and doctors have balked, objecting that the provisions are too complex and subject them to substantial risk of financial loss rather than gain.” http://www.markpine.us/?p=3783

Premier healthcare alliance has written a letter to CMS with recommendations for ACOs, including the immediate allowance of multiple payment models, according to a Premier news release.

The letter mentions the following recommendations:

• CMS should allow multiple payment models within the ACO model from the start, such as shared savings, bundled payments, capitation or a combination of these.
• Existing legal exceptions regarding one provider entity funding the infrastructure costs of another need to be broadened, particularly for small physician practices.
• CMS should allow ACOs to participate in the medical home demonstration programs.
• The program should be transparent to beneficiaries.
• CMS should develop criteria focused on the outcomes of care rather than processes used to achieve it.
• CMS should structure ACO quality reporting requirements to satisfy the Hospital Inpatient Quality Reporting Program, the Physician Quality Reporting Initiative and meaningful use programs.

Premier serves more than 2,400 hospitals and health systems. The letter was issued as a response to CMS’ request for comments regarding aspects and policies of ACOs.

that pretty much destroys everything you just made up, er I mean said.

Hospitals want more opportunities to take risk

The big take away though is this;

“CMS should develop criteria focused on the outcomes of care rather than processes used to achieve it.”

Typical academic/politician, outcomes don’t matter its the process to try, and they said no it should be about the outcomes.

“Consensus was impossible. Republicans have made it clear that their primary goal is to make sure that Obama is not re-elected. ”

Prior to that Obama made it clear he was going to pass his version of healthcare without any input from Republcians. Nice job starting half way through the story Maggie. Republicans tried to meet with Obama and he wouldn’t allow it. It was his actions on healthcare reform that caused them to so strongly advocate for his defeat.

“Medicine is perhaps the only sector where you are almost always paid even if you do a bad job. In that sense, the provider takes no risk.”

Government and Journalism, how many years did you make a living at it?

“It was predictable that hospitals and
some doctors would balk at the idea of taking financial risk.”

Dishonest hackery, I have never heard a hospital object to taking risk, in fact prior to this and to this day we are working with hospitals to set up vehicles to take risk, even had a discussion with Paul about this. Their objection to ACOs was the reporting was impossible. The amount of work it created was not possible. You need to go do some more 3 hour blocks of internet reserach or gosh forbid maybe call a couple hospitals.

Consensus was impossible. Republicans have made it clear that their primary goal is to make sure that Obama is not re-elected. Thus they were committed to opposing any major piece of legislation that he supported–particularly one this big.

The PPACA is t he major achievement of his first term.

As for Berwick and the ACO rules– It was predictable that hospitals and
some doctors would balk at the idea of taking financial risk.

Medicine is perhaps the only sector where you are almost always paid even if you do a bad job. In that sense, the provider takes no risk.

Paul Levy recently wrote about a survey of hosptial CEOs which showed that the majoirty did not llist “patient safety” or “quality” as among their two top pirorities.

Why? Beause hospitals are paid whether or not patients acquire infections, whether or not they do a good job of controlling a dying patient’s pain, whether or not the oncologist refuses to let a palliative care specialilst talk to the patient, whether or not they use checklists during surgery . . . .

The is little financial incentive to make patient safety and quality a hospital’s top priority.

Docctors and hospitals are complaining that it is not at all clear that ACOs will help them make more money. They migiht even lose money!! They would like to be eligible for bonsues without taking financial risk!!

The goal of ACOs (and the goal of reform) is not to enrich hospitals and doctors. Poorly run hospitals will suffer. Wasteful hospitals will suffer.
Hospitals that do not insist that all doctors follow rules designed to keep patients safe will suffer.

As Berwick and others have said, “hospitals need to learn to think of themsleves as cost centers, not revenue centers.” Their goal should not be to increase revenues. Rather, a hospital’s go should be to reduce its costs–and the cost to payors.

Berwick has also said that CMS “anticipated” the objections.
I certainly anticpaetd the objectoins. Anyone could foresee that hospitals
would object to rules that force them to focus on quality, report quality, and
meet quality requirements.

Health Care Providers are going to be held “accountable.” They are not accustomed to being held accountable. Of course they are uncomfortable .
Of course they find the rules “onerous.”

It’s disappointing, but not suprising, that I haven’t seen a single hospital or physicians’ group suggest ways of strenghtening the rules to make them
better for patients. Instead, every group is saying: “This isn’t good for US.”

ACOs are supposed to be patient-centered, not provider-centered.

Do the rules need to be fine-tuned? No doubt.
Will it take longer than intitially hoped to get ACOs up and running?
Almost certainlly.

Are they a “disaster.” No.

Problem is here.

If we were ALL free from JCAHO and CMS and runaway consumerism and litigation, we could all “experiment”.

The central committee canot possibly have all the answers, no matter who is at the top. Just ask Stalin.