GMCB Loses Top Finance Staffer

by Hamilton E. Davis

   Andy Pallito, the top numbers guy at the Green Mountain Care Board, is leaving the Board after just nine months on the job. Pallito will take a finance position at the Community College of Vermont. He will leave the GMCB in mid-March.
   Pallito will become Dean of Administration for the 12-campus unit of CCV, which operates under the umbrella of the Vermont State Colleges. “It was a fantastic opportunity that I just could not pass up,” Pallito said. “And it will round off 26 years of service in Vermont state government.”
   The loss of Pallito, coming as it does in the formative days of the Fiscal Year 2019 hospital budget season, is a serious blow to the Board. The budget process is particularly complex this year because the Board has to integrate its normal regulation of spending for the State’s 14 hospitals with the first full year of OneCare Vermont’s program to shift the financing of health care from fee-for-service to capitation.
   OneCare Vermont, the state’s only Accountable Care Organization, will function as a consortium of doctors and nine of the 14 hospitals that will offer care to roughly 20 percent of the state’s population under fixed price contracts with the State’s Medicaid agency, federal Medicare officials, and Vermont Blue Cross.
   The most important of those contracts is the one with Centers for Medicare and Medicaid Services, which administers the federal Medicare program. Beginning this year and extending out five years, Vermont’s health care delivery system is committed to hitting cost containment targets that are lower than federal Medicare trends across the country. The key element in that equation is spending by Vermont’s hospitals.
   Pallito’s first year covered just the latter portion of the budget year, which begins now with guidance from the Board to hospitals that are drafting their spending plans. Those plans must be submitted to the Board by July 1; and the Board has to announce its final authorizations by Oct. 1.
   Kevin Mullin, the chair of the Green Mountain Care Board, will have to scramble to find a replacement. And there are some indications that it won’t be easy. The decision by Governor Phil Scott to cut three members of the Board’s 28-member staff, and Mullin’s routine acquiescence in it have generated a serious morale problem at the Board. I wrote about that in my last post. (L-link). Mullin has to hope that Pallito is the last shoe to drop, not the first.

Cutting GMCB Staff is a Very Big Deal

by Hamilton E. Davis

  In my last post, I raised the question whether Gov. Phil Scott’s administration could be maneuvering to somehow get rid of the Green Mountain Care Board, whose job is to recast the Vermont health care delivery system. I think the answer to that is no; the administration knows that it cannot do that without causing a politically dangerous mess. I think what it is doing is cutting the bone and muscle of the Board to the extent that the Board can’t accomplish what it was designed to do. And Scott wants to do that without suffering any political damage.
  Scott’s budget team has told the Green Mountain Care Board that it needs to cut its roughly $8 million budget by about $250,000. Budgets get cut all the time, of course, but it is striking how short sighted this effort is. The first thing to understand is that only 27 percent of the Board’s budget comes from the General Fund, which is about $1.8 billion. That means that the quarter million dollar cut to the Board’s budget will save only about $75,000 for the General Fund. In other words, an 11 percent cut in the Board’s already small staff will generate a savings to the General Fund of just four one thousandths of one percent.
  It gets worse. The way the rules operate, the only way the Board can make the Scott-ordered cuts is to lay off staff members. Moreover, the rules dictate that staff members who are on a sort of temporary employment have to go first. In the current case, the three employees slated to lose their jobs aren’t some minor leaguers operating on the fringe of the staff operations; they are highly skilled people who will absolutely be needed to meet the huge challenges facing the Board as it shepherds the country’s leading health care reform project through uncharted waters.
  For example, when Susan Barrett, the chief of staff, and Kevin Mullin, the chair of the Board, testified in the Legislature about the cuts, Barrett said in answer to a question that two of the members on the chopping block had done the major part of the staff work on the Board’s survey of primary care doctor attitudes in the state about reform. This survey resolved some of the most contentious issues surrounding the role of primary care in the state. In fact, the survey blew up a thoroughly malignant effort in the Vermont Senate to drive the Board in a direction it clearly didn’t want to go. 
  The survey was conceived and designed by Jessica Holmes, a Board member whose day-job is as professor of economics at Middlebury College. Important elements of the work, however, were carried out by the staff, and that kind of thing will become more important as the health care delivery system enters a fully elaborated reform phase. 
  There is yet another dimension to this issue. When asked about the whole cut issue, the chair, Kevin Mullin, replied:

  It’s no big deal. We will be able to do the work we need to do with the staff we have left, and we will have been stewards of the taxpayer’s dollars.

  That response ran pretty high on the obtuse meter. An 11 percent cut in an elite, but very small staff is in fact a very big deal, both in the staff’s ability to perform its particularly difficult mission, and in the morale and esprit de corps that animate such a team.
  The morale problem doesn’t lie so much with the staff members who are gone, but with those who are left. The Green Mountain Care Board badly needs the staff experts that it has recruited and trained to a high level; and if they conclude Mullin won’t have their back under pressure then they could just leave—many of them for multiples of the salaries they get today.
  It isn’t clear yet how all this will play out. There is already a bill in the House that would reverse the cuts ordered by the Scotties to the Green Mountain Care Board, and to some other elements in state government . I have no idea yet whether that bill will have legs; far more bills are written in the House than get a hearing, let alone passed. So perhaps the Legislature will step into this issue.
  What is now perfectly clear is that Scott is prepared to make very damaging cuts to a very small body that is managing not just an industry that spends far more than the state budget itself, but produces 20 percent of the whole state economy. The term “false economy” was coined precisely for situations like this.

Does the Scott Administration Want to Kill the Green Mountain Care Board?

by Hamilton E. Davis

   Vermont is now a little over a month into the first full year of its health care reform’s execution phase, and things are moving along fairly smoothly, at least as smoothly as one might expect for such a fraught public policy enterprise. The Green Mountain Care Board has cut the historic rate of annual hospital budget increases in half, and OneCare Vermont is expanding its 30,000-patient 2017 Medicaid base in northwest Vermont to roughly 122,000 Medicaid, Medicare and Blue Cross patients across much of the rest of the state. So far, so good.
   The Legislative session, meanwhile, is in full swing, accompanied by no more than the normal angst. The House Health Care Committee is continuing its efforts to figure out how the system is supposed to work; the Senate is working on legislation to permit importing cheap Canadian drugs, a good idea; and whether to shift all primary care financing to a state tax, a terrible idea that will attract a ton of feel-good support, but which is certain to run into Governor Phil Scott’s core governing principle—no new taxes. None of this activity is directly related to the way the reform project actually works.
   Underneath this relative tranquility, however, powerful anti-reform currents are at work that pose a real threat to the Vermont project. One such current is the lack of effective political leadership for reform in either the governor’s office, or in the Legislature. The second is the reluctance of a significant minority of primary care doctors in the state to accept the proposition that the delivery system needs to be restructured. (That, in fact, is the source of support for so-called Universal Primary Care, now on the table in the Senate). The tiny corps of adepts that constitute my readership will recognize that I have written about the issue of political leadership before; I return to it now because it has moved closer to the surface, and, moreover, because there is a new target—the Green Mountain Care Board itself. That constitutes real danger: the success of reform in Vermont depends on the intricate dance between OneCare Vermont, and by critical extension, UVM, and the Green Mountain Care       Board. Both of those players need to bring their A games every day or the project could be crippled. The hard question now is how to assess the threat…

The Mike Smith Caper

   A few months ago, Governor Scott nominated Tom Pelham, who served as Tax Commissioner in the Dean and Douglas administrations, to fill the vacancy on the Green Mountain Care Board created by the retirement of Con Hogan. Pelham had spent the Shumlin years in the governmental wilderness and during that time he published some commentary on state financing from a fairly conservative perspective.
   In the light of that background, the advocacy group Rights and Democracy urged the Vermont Senate to refuse to confirm Pelham for the Hogan seat. The advocacy group cited three Pelham commentaries in VTDigger and The Rutland Herald; these touched on health care reform, but their main thrust was a critical riff on the spending proclivities of state government, especially the Legislature. I count myself among those who strongly support the Vermont health care reform project, but I could find nothing in any way unreasonable, factually wrong, or poorly argued in these articles. In any case, Pelham is now sitting on the Board and is certain to be confirmed.
   There is no way yet to tell where Pelham will come down on the substance of the issues before the Board. He could turn out to be bent on undermining reform—or not. My inclination is to take him at his word that he supports the All Payer Model, the litmus test in the reform era. The deeper significance of the Pelham issue in the near term is not so much his appointment as some of the reaction to it.
   I am referring here to a column written for VTDigger by Mike Smith, who also hosts a radio program on policy and political issues. (He recently retired from his commentary gigs)  Smith’s direct political experience was as Secretary of Administration in the Douglas administration; in that capacity he was Tom Pelham’s boss. He was also a close colleague of Jason Gibbs, who served in several key posts under Douglas and who now serves as Chief of Staff to Governor Scott. Smith is not just a talking head, Smith is connected. So, it’s worthwhile looking closely on what he wrote. 
   Smith’s argument runs along these lines: the Green Mountain Care Board was created to “oversee and regulate the state’s planned single-payer health care system” and as a means toward that end was empowered to recruit a fully elaborated technical and policy staff. Smith asserts that the death of the financing aspect of single payer has so changed the reform environment that the mission of the Board needs to be significantly recast, and while Smith doesn’t say this directly, downgraded…some of his commenters on Digger interpret this, accurately I think, to mean the Board should be repealed. In fact, there is now  a bill in the House that would repeal the Board, although no action on that is likely. 
   Irrespective of this last point, the real issue is whether the Board is doing what it should be now; in other words, whether Smith’s assumptions are valid. In my view, his assumptions are totally and demonstrably wrong. He has a right to his opinions, of course; and it’s not as though he doesn’t have company. Spend some time in the Senate and House health care committees and you will see very quickly that there is considerable opposition to the reform track the state is on. And it isn’t just in Vermont: much of the national press gave up on Vermont reform when the financing side went away; so did at least some of national health policy community.
   So, Smith and these other policy players are all wrong? Yes, precisely, totally. Herewith the case:
   The first single payer health care system in North America debuted in Canada in 1984. The going-in system was fee-for-service with multiple payers. In their new system, the Canadian national and provincial governments picked up all the costs, and raised the money through taxation. At the patient level, the care was free. The structure of the hospital system remained the same: doctors and hospitals competed with one another and got paid per episode of care.
   In 1984, the Canadian delivery system had excess capacity, more hospital beds and doctor availability than they needed. Within months the huge demand kicked off by the new financing system blew through the excess capacity and the Canadian system began to impose constraints on access to the point where it had some of the worst access in the western world.
   So, when the Shumlin administration built its single payer in 2011, it didn’t start with access, it started with cost containment. The Shumlin plan had two main pillars—cost containment first, and once that was accomplished, a shift of health insurance premiums and other private financing (about half the total cost) to the Vermont tax base. In his early speeches on the subject, Shumlin said repeatedly: “If we can’t get costs under control, we’ll pick up our marbles and go home.”
   In December of 2014, Shumlin picked up his marbles and in 2016 he went home. Importantly, however, the marbles he picked up were the financing marbles—the Green Mountain Care Board kept right on rolling toward cost containment, and so did OneCare Vermont, the state’s ACO. Today, Vermont is closer to achieving sustainable health care costs than any other state in the country. Federal Medicare officials understand that and they are praying we succeed, because health care costs are killing the federal budgets (Medicare) and state budgets (Medicaid).
   That’s why Smith is wrong. He acknowledges that there has to be regulation of hospital budgets, the engine of health cost inflation. What he doesn’t get, or doesn’t want to get for political reasons, is that we still have to move from fee-for-service reimbursement to block financing to get costs under control. Failure to do that will cost Vermonters hundreds of millions of dollars in unwarranted health care payments, and it won’t take long to get there.
   I have suggested above that maybe Smith doesn’t want to see reality in this issue for political reasons. I don’t know Smith and I have no direct knowledge of his motivation, but consider:
   One of the most egregiously inflationary decades in Vermont’s hospital history ran from 2000 to 2009. During that period, nearly every hospital in the state doubled its spending, with no obvious demographic changes. Hospital costs went from $922 million to $1.7 billion, a dollar difference of $756 million, less than half of which was reasonably justified. People got older, of course, but at a tiny annual rate compared to the health care costs.
   The Governor for eight of those 10 years was Jim Douglas. His Secretary of Administration was Mike Smith; his Secretary of Civil and Military Affairs was Jason Gibbs, who is Chief of Staff to the current governor. That administration did nothing to rein in the health care cost engine. In fact, it was the decade of the “oughts” that finally convinced every serious policy person that something had to be done to solve the cost problem. The burden of the Smith column was to suggest that this history did not exist, and that the Green Mountain Care Board has become something of an expensive luxury.
   Maybe this is all coincidence, but in my view, the single most important factor in the political environment for health care reform is the fact that Phil Scott is massively conflicted over it. Other than blocking any new taxes, and the fantasy about turning Vermont into some amalgam of eastern Massachusetts and Boulder, Colorado, Scott doesn’t appear to have any substantive policy ideas of his own. But health care reform is plowing steadily ahead and Scott is clearly befuddled by it.
   On the one hand, he has told the federal Medicare officials that he was “all in” on reform. As far as his own public is concerned, Scott has basically told the people nothing. As his Secretary of the Agency of Human Services, Scott hired Al Gobeille, who, as Chair of the Green Mountain Care Board, did a brilliant job negotiating a ground-breaking agreement with the Feds that is taking Vermont to the forefront of 21st century American medicine. Gobeille may be doing a good job as Secretary, but he has basically vanished from the health care reform scene, despite the fact that he knows as much about it as any of the players at any level. I believe that Gobeille’s retreat from the legislative scene is being driven by Gibbs. The only Gobeille appearance in a long time was his recent testimony before Senate Health and Welfare in opposition to the Universal Primary Care bill, which would require a new tax…so, forget about it.
   At this point, I can sense some skepticism from my corps of adepts. Is there evidence that Scott wants to kill the Green Mountain Care Board? Fair enough. My belief is that Scott himself really doesn't want to do that--it would be too much of a political mess. But I think it's clear that Gibbs does--and that sentiment along represents a serious threat to the Board's ability to do the work it needs to do. The argument for that looks like the following:
    The course of reform depends on the outcome of a delicate minuet between the Green Mountain Care Board, and OneCare Vermont, to shift the financing and culture of the whole medical delivery system. A couple of weeks ago, Scott’s budget guys told Kevin Mullin and the Green Mountain Care Board that they would have to cut from their budget for the state’s fiscal year 2019, which starts July 1 of this year, by $250,000.
   That is a 9.4 percent reduction in one of the single most important pieces of state government. What is more striking is that this cut, which will force the Board to lay off three of its 28 employees, will actually save only $75,000, which comes to just four one thousands of one percent in the $1.8 billion General Fund. That number is so small it will get lost in the rounding of the state budget... A budget cut of just under 10 percent, and a 12 percent reduction in its staff to save four one thousands of one percent—is that really about repairing the General Fund, or is it a transparent political move by Scott to push health care reform even further under the Fifth Floor rug, and maybe provide some surcease from the Gibbs pressure as well. And with Mike Smith operating as a stalking horse for his old Douglas-days partner?
   Draw your own conclusions. Mine should be pretty clear by now. But the core question remains: Will the Green Mountain Care Board be able to continue as the effective leader of health care reform in the state?

   I'll come back to that issue on Tuesday.

What is an ACO, Anyway?

by Hamilton E. Davis


   One of the most severe challenges confronting health care reform in Vermont and the United States is the fact that reform proponents speak a different language from day-to-day English. The essence of reform is changing the way money flows into the system so as to change the economic incentives for doctors and hospitals. People who specialize in health care reform understand that and they have developed ways to talk about it to each other. The problem is they talk to the non-specialists the same way.
   To the press, legislators and the public, the language of the priesthood is incomprehensible. The insiders are industrial-strength professionals. Many have advanced degrees in the field. They spend every day at it, and most of them have for years. The rest of the folks, especially the legislators, are amateurs. Many are intelligent, but they are decidedly not trained; they have no professional staff; they have a governor who is hiding from the reform issues; and the legislators who are specifically assigned to deal with reform directly don’t understand the health policy creole any better than their colleagues.
   Some of that is inevitable: any complex, technical matter can be difficult to grasp easily, or quickly. It is also true, however, that the language of the health reform priesthood has evolved in such a way that it deflects inquiry and thereby masks complexity; and, more importantly, reduces the political pressure that inevitably attends major cultural and financial change.
   Following is the kind of thing you hear when the priesthood talks to the congregation. “We need to shift the financial incentives by moving to alternative payment models…we need to shift from fee-for-service reimbursement to value-based payment…we need to shift from paying to cure people after they are sick to keeping them from getting sick in the first place…we need to focus on wellness, not expensive therapies.”
   That effectively shuts down the instinctive resistance to change: who can object to getting value for what you pay? And who wouldn’t rather stay healthy on the cheap than undergo powerful medical therapies that cost a ton of money and involve getting stuck with needles and sliced up with scalpels and made to take horrible-tasting stuff that makes your hair fall out?
   At that point, the priest, or priestess, is off to the races, laying out the intricacies of ACOs, and attributed lives (which actually has nothing to do with “coverage”), and MIPS and MACRA, and multiple payers versus single payers, and one-sided risk compared to two-sided risk, and how CMS (or CMMI) looks at things rather than how DVHA wants its contracts compared to how Blue Cross looks at the whole hairball. All of which sails right over the heads of the congregation, and leads to the confusion and angst that have hung over the legislature for the last few weeks.
   I believe real understanding has to start with what an ACO is. ACOs are the mystery meat of reform. After seven years of work on this issue, you hear questions in the legislature like: “Why do we have to have an ACO? Will I be covered by the ACO? Should we write letters to patients to tell them they are in an ACO, or would it be better to put a sign to that effect on the doctor’s waiting room wall. Questions like these flummox the professionals because they have no relevance to the real issues.
   So, a suggestion on a new way of talking about an ACO:
   An ACO is just a business device that allows a group of hospitals and doctors to deliver a full range of acute medical services to a block of patients for a fixed price per person. That’s it—fixed price contracts, which is the only way to get health care costs under control.
   It’s not that complicated; it’s the kind of thing that ordinary people do every day. They buy stuff -- lawn mowers, cars, ice cream cones. The stuff has to be good enough, or they won’t accept it. The price has to be right, or they won’t pay it. If a person wants to build a garage, he or she finds a guy with a pickup truck, a chop saw, a nail gun and strong forearms. The buyer makes a deal with the pickup truck guy to build the garage for a specific (fixed) price that both can live with.
   There is an alternate way, however. You can hire the guy for “time and materials.” Whatever volume of supplies the guy buys, at whatever price is most convenient, you pay for. You’re paying the guy by the hour, so the longer it takes him, the more he gets paid. Congratulations. You have the most expensive garage in your neighborhood.
   We have been buying “time and materials” health care in the United States for 300 years, and since 1966, when Medicare and Medicaid put a blowtorch under the demand teakettle, it has been killing us. Before the federal and state governments began paying for medical care for the elderly and the poor the country spent 6.6 percent of its gross national product on health care. That number nationally is around 18 percent, and in Vermont, it’s 20. That is why Americans pay twice as much for health care as do the citizens of other fully developed countries—for worse results.
   Fixed price contracts are, by a very long reach, the best way to turn this malignant tide. Federal law established ACOs as the vehicle to make such contracts possible in a very complex industry. If there is a consensus understanding of what the Vermont ACO is, then the at least the profusion of issues that arise in the legislature’s deliberations can begin to focus on real questions:
   So, how has it worked so far? Are patients included in fixed price contracts getting the care they need? Is there any evidence that patients included in the 2017 fixed price contracts got deprived of necessary care? What is the effect of the new contracts on the cost of care in the state? What are the barriers to expanding the project to meet the federal requirements for Medicare participation…how should we deal with primary care as opposed to hospital-based care?
   There will be an avalanche of such questions, but if there is a common understanding of what the ACO is, at least the forum will consist of a conversation instead of cacophony. And perhaps, slowly, the professionals and the amateurs will learn to talk to one another.
   Trust me, that would be a very good thing.   

A Model for ACO Payments to Primary Care Docs

by Hamilton E. Davis

Note to my readers: the following text is a model showing how OneCare Vermont, the state’s Accountable Care Organization, will pay primary care doctors who participate in the expanded reform effort that debuted at the first of this year. The purpose of the model is to underpin two articles that are not yet written—one on testimony before the Green Mountain Care Board last week by a group of primary care doctors, the other on the issue of how the Green Mountain Care Board is managing the reform effort. I am putting up the model by itself because some of the questions it addresses are already under discussion by the House Health Care Committee. The two fully elaborated articles will be forthcoming.

The Assumptions

   The following is a model showing the potential payments to a primary physician who attributes his or her patients to the ACO, OneCare Vermont. The size of the panel is taken from the research done by Dr. Deb Richter in support of her proposal for universal primary care—1200 patients. The actual panel sizes could range from 600 to 700 on the low end to 2,000 on the high end. The revenue in the Richter plan to support that panel would be $500 per patient, or a total of $600,000 per practice per year. The Richter number does not include payments for mental health and substance abuse treatment. Nearly all the numbers in the model are available from public sources; I have indicated where I do not have a hard number.
   A second assumption is that the model practitioner would attribute half the panel—600 patients—to OneCare. That percentage could vary widely. Those patients would be arrayed across three payers—Medicare, Medicaid and commercial. The spread could be highly variable based on payer-mix in the provider’s service area; and it could vary also by specialty—one practice could have large numbers of Medicare patients, whereas a primary care pediatrician probably would have no Medicare patients. The benefit package was designed by OneCare as part of its budget submission to the Green Mountain Care Board; the Board approved the budget in December. The model numbers would apply to the 2018 calendar year (with one exception noted below).
   A third assumption is that a primary care doc working full time would take home $180,000 per year, That number is a rough median from Web data on primary care salaries in Vermont. The $180,000 number would probably be high for a rural doc with a lot of Medicaid patients; some hospital-based providers might be higher. The remaining $420,000 to a single-doc practice would pay for infrastructure—nurses, clerks, other expenses.

The Compensation Plan

   Step One: OneCare will pay an administrative fee of $3.25 per member per month to primary care doctors attributing patients to the ACO. In the model that is 600 patients. The $3.25 rolls up to $39 per patient per year; for our model practice the total per year would be $23,400. The purpose of that is to defray the cost of reporting necessary data to OneCare.
   Step Two: OneCare will pay primary care doctors a premium of $15 per member per month for each medically complex patient in those practices. That would roll up to $180 per patient per year. OneCare will determine the eligibility of a given patient using an algorithm designed by the Johns Hopkins academic medical center in Baltimore. There is no way to determine how many such patients a given doctor would have. But national data shows that the medically complex proportion of the Medicare and Medicaid patients of an average primary care practice runs to about 16 percent. For Blue Cross patients, the percentage would be just three percent.       
   The payer mix for a given practice can vary widely, of course, but the generally accepted numbers show that about half of acute care is paid for by federal and state governments (Medicare and Medicaid) while the other half is paid for mostly by commercial insurers.
   To get a model figure for the complexity payment, I’ve cut the 600 total attributed patients to 300 (using the 50 percent government parameter). Then, based the national averages, I’ve taken 16 percent of the 300, which is 48 patients. At $180 per patient, our model physician would get an additional $8,640. The private insurance cohort of 300, mostly Blue Cross, would yield just three percent, or nine patients, At $180 per year, Blue Cross patients would yield $1,620. The total complexity of care component would amount to $10,260.
   Step Three: OneCare will operate a Value Based Incentive Fund that will pay a premium based the on the quality of the care delivered by the primary care physician. There is no good way yet to estimate what this program might produce for a primary care doctor. OneCare will use the experience obtained in 2017, but that won’t be known until mid summer of 2018. Based on some conversations with people in the industry I have used a placeholder of $8,000. It is a very rough estimate, but considered conservative.
   Step Four: OneCare will also pay a premium of $10 per member per month, or $120 per year, for those primary care docs who are designated by their complex patients as the “Lead” physician in the management of their care across the continuum of that care. This number is likely to be small for a given doc; there is no way yet to estimate what the experience will be in the system. For a panel of 1200, with 600 of those attributed to the ACO, I’ve used a guess/place holder of 20, which would be an additional $2,400 per year to the physician.
   Step five: One of the most financially important components to membership in OneCare is the federal government program to pay primary care doctors in such organizations five percent more for the care they deliver to Medicare patients. The model uses the Richter proposal. If we cut the panel to 600 and then assume that 200 of those are Medicare and multiply by five percent of that we get $5,000. That benefit would not be available until 2020. A positive wrinkle for primary care docs in this category is that Medicare will pay the five percent bump for all the Medicare patients in OneCare participating practice, even those whose lives are not attributed. An example of such an increment would be Medicare patients enrolled in the Medicare Advantage program run by United Health Care; care for those patients is paid for by United, but Medicare would still pay the five percent bump. For the model, that would double the bump category to $10,000. I have limited this category to $5,000, however, because it won’t take effect in 2018; another reason is to render the whole exercise more conservative.

Total Financial Benefits to Primary Care

Administrative fees    $23,400
Complex care               $10,260
Medicare bump           $5,000 (not available until 2019)
Quality incentive        $8,000 est.
“Lead care”                      $2,400  (guess/placeholder)

Total                                   $49,060

Indirect Benefits

       In the planning phase of reform, primary care doctors in Vermont have made it clear that what they want most, in addition to fair financial reimbursement, is a reduction in the administrative burdens they must bear in the process of delivering care to their patients. That theme has led OneCare, the Green Mountain Care Board, federal Medicare officials, and Vermont’s Medicaid agency to develop a series of steps to ease the administrative burden:

  • In the first step of the execution phase of reform, which debuted last February, OneCare and the Department of Vermont Health Access (the state’s Medicaid Agency) negotiated a partial waiver of so-called Prior Authorization requirement in the reimbursement system. “Prior Auth” forces docs to get permission from somebody outside the delivery system to deliver care like X-rays and MRIs. There is a long way to go on Prior Auth—it is still required on drug prescriptions, for example--but the reform apparatus has made a start.
  • The Vermont health care reform team—The Green Mountain Care Board, the Governor and the Agency of Human Services-- persuaded federal Medicare officials to authorize the expenditure of $7.5 million for the continuation of the so-called Blueprint program in 2018. Blueprint money basically enables primary care doctors to address the social determinants of care. The extra bump was limited to Vermont because the feds are so hopeful that the state can lead the way to capitated financing for Medicare. Those officials believe that costs in the Medicare program cannot be controlled in the current fee-for-service reimbursement system. Federal Blueprint money has been eliminated in the rest of the country.
  • The U.S. Congress in 2015 passed the so-called MACRA legislation. This law was designed to provide both a carrot and a stick to encourage providers to participate in an alternative payment model like the one now being operated by OneCare Vermont. In essence, the new federal law says that if you join the OneCare, the operator of the alternative payment model, you will receive up to five percent more for the care you delivered to Medicare patients last year—with no quality reporting requirement…that’s the bump. The stick is that if you don’t join, you have to do considerable quality reporting to Medicare and if you don’t measure up your Medicare payments can be cut by up to nine percent. The carrot here is both the five percent increase in reimbursement, plus the elimination in the amount of federal paperwork you have to produce to show that your quality is high.
  • An important factor in the whole primary care political environment is that the benefits listed above are available not only to independent primary care doctors, but to primary care docs in Federally Qualified Health Centers (FQHCs). FQHCs already get federal subsidies aimed at ensuring the availability of primary care in underserved areas. The FQHCs that join OneCare will continue to receive those federal subsidies, as well as the financial support from OneCare.

Discussion/caveats

   An obvious question is to determine how much of the increased revenue to each doctor is needed to support new demands on the practice, and how much would be an increase in income to the doctor. Participating in OneCare will generate some reporting requirements, but some of that work is already being done now. A rule of thumb in the industry is that one should divide the revenue increment in half, which would mean a $24,500 increase in business expense for each doctor and a $24,500 increase in the doctor’s take home pay. How the new payment system will operate in detail in Vermont won’t be known for some time. A preliminary assessment will probably be possible by mid-summer, when the figures from the first 11 months of 2017 are available. A major source of variability will be economies of scale: a five- doctor clinic would be able to structure support services more efficiently than that of a single doc. Moreover, to the extent that the new payment methodology leads to greater participation in the new new model the pay increase to the doctor would rise also.

Vermont Reform Sails Through Headwinds Into 2018

by Hamilton E. Davis

    Vermont’s health care reform initiative is entering its eighth year in a surreal policy and political atmosphere.
    Born in 2011 as then-Governor Pete Shumlin’s single payer plan, the reform project is on track to reach its most important target—cost containment in the doctor-hospital system in the state. The federal government has tasked Vermont with leading the U.S. to sustainable health care costs based on a shift from fee-for-service reimbursement to capitation.
   After five years of planning, the reform project entered the execution phase in 2017, starting with a contract between the state’s Medicaid agency and OneCare Vermont, the state’s Accountable Care Organization (ACO), to deliver care to some 30,000 Medicaid recipients in northwest Vermont, for a fixed price of $93 million; the ACO is now completing contracts with the federal Medicare Agency and Vermont Blue Cross to expand the total covered population to about 120,000 Vermonters.
   So, given this progress, which is unprecedented in the state’s 40-year cost containment odyssey, why should we consider the reform environment surreal?
   An important reason is a historical one. The original Shumlin plan called for getting costs under control first, and then shifting the private sector portion of the health care bill (about half the total) over to the state’s tax base. When Shumlin bailed on that portion of the plan late in 2014, the political momentum for reform faded away. 
  The reality, however, is that getting costs under control was always a prerequisite for the financing side, and that process is still underway. Indeed, there is nothing to prevent curling back to state financing assuming costs can be reliably reined in. That can’t be accomplished for at least another three to four years, if ever. But getting the costs under control would still amount to a stunning performance that would save Vermonters enormous amounts of money.  
   What’s going on now is that myriad issues that really make no underlying sense are coloring the environment for reform. The following is a sketch of those issues, many of which will play out in the current session of the Legislature.
    My tiny audience, with its exceptional motivational purity and its extraordinary depth of insight, will understand immediately that the sketch lacks anything close to sufficient evidence to compel agreement. Trust me that such evidence is extensive; I’ll expand on each element as the new legislative session progresses. Suspend judgment till that is forthcoming. For now: consider:

  • The most critical element in carrying out a major reform project is political support from the leader of the government—in this case, the governor. Since taking office last January, Phil Scott has uttered fewer than a dozen sentences about reform and the content of those sentences is strikingly misleading. In his state of the state address last week, for example, Scott referred to the project as an experiment that his government will continue to evaluate.
       The reality is that Scott has evaluated nothing in the reform arena, and is unlikely to do so in the future. In the first place, it is misleading to talk about the project as an experiment that could simply succeed or fail. The project is where the whole health care delivery system is headed. The only element that is directly up to Scott is the decision by his Medicaid Agency to enroll its recipients in a capitated contract with OneCare Vermont.
       Scott neglected to mention in his state of the state that his Department of Vermont Health Access (DVHA) had already signed such a contract with OneCare to extend the Medicaid portion of the project to most of the rest of the state.
       If you check the Green Mountain Care Board website you can see the actual contract. It shows that the $93,357,767.52 payment for 2017 has been increased by $138,965,645.44 to a total of $232,323,412.96 for 2018. (That spending is split between the federal and state governments.)
       And while Scott does not administer Medicare directly, his all-in support for reform is critical to the federal bureaucrats’ decision to break new ground with OneCare on financing of the politically critical health-care-for-the-elderly program.
       Those bureaucrats were in Montpelier to talk with the Vermont players last summer, and all the reports that drifted out of those closed sessions indicated that Scott had indeed signed on. If he hadn’t, the whole Vermont reform would be headed for a ditch.
        In any event, OneCare’s negotiations with the feds are just about complete and should join the Medicaid agreement on the Green Mountain Care Board very soon. Also very near to completion are the OneCare negotiations with Vermont Blue Cross to enroll a portion of Blue Crosses’ Exchange patients in a capitated arrangement. The total OneCare budget approved by the GMCB last month will run to $620 million or so which is one quarter of the roughly $2.5 billion tab for the state’s acute medical care. That’s one heck of a pilot.
       Scott clearly considers the reform project a live hand grenade, but he can’t hide much longer. Health care constitutes about 20 percent of the whole state economy and dwarfs every other single arena that the governor deals with. He’ll have to tell the Legislature, the public and the press where he stands or he’ll just look silly.
  • Speaking of the Legislature, its response to the reform project has ranged from perverse to just plain weird. In last year’s session, the major systemic issue was the Senate campaign to force private insurers to pay the University of Vermont academic medical center no more than they would pay to independent physicians.
       The reality is that such a step is impossible because UVM doctors get paid salaries, rather than fee-for-service, the prevailing method for paying independents. Time ran out on the so-called pay parity bill, but it has been passed by the Senate and still sits in the House Health Committee.
       The underlying driver of the Legislative environment has been an extended campaign by Senate President Pro Tem Tim Ashe, a Chittenden Democrat/Progressive and a few of his colleagues to denigrate the University of Vermont’s academic medical center; their argument is that the UVM system is too big and too domineering, and needs to be reined in.
       The difficulty with the Senate campaign is that none of its members understand how health financing works. The evidence for that is that the Green Mountain Care Board did precisely what they were told to in the pay parity bill—even though the bill hadn’t passed--and it changed precisely nothing. More on that soon…
  • With no political management of reform, the Legislature has begun to freelance, always a problem if the people trying to move the system have no real idea what they are doing. The pay parity bill in the last session was an example.
       The current session is likely to see more of it. One possibility is a suggestion by Sen. Chris Pearson, a Chittenden County Progressive/Democrat, that non-profit organizations that get state money be forbidden to pay executives more than Gov. Scott, about $145,000 a year. Such a step would be patently ridiculous: it would decimate health care in the state.
       A second initiative, one that is already gathering some steam, calls for the state to pay for all primary care. There will be lots of noise about that, but it isn’t likely to go far because it would require some sort of payroll tax. The most credible thing Scott ever says is that he won’t accept any new taxes. A more subtle, but actually more important caveat is that cost containment for Vermont rests on integrating its delivery system, and the primary care idea would carve primary care out of the system in operationally important ways. It is anti-integration, in other words.
       Still, the idea can be made to sound good and the concept of integrating the health care delivery system as the key to a cost-sustainable 21st century future is way off the Legislative radar; at least it is now.
  • One of the more bizarre currents in the reform political ether is the idea that maybe the Green Mountain Care Board should just be shut down, reconfigured, or emasculated somehow. That threat has been implicit in the contentious back-and- forth between the Board and the Ashe wing in the Senate. But it rose nearly to the surface in a column published recently by Mike Smith in VTDigger. Smith, a top staffer for former Governor Jim Douglas, took the occasion of the appointment of Tom Pelham to the Board to raise questions about the Board’s future, now that the financing aspect of reform is off the table.
       Smith didn’t actually say the Board needed to go, but he certainly implied it, and many of his readers took it that way. Smith has a right to his opinion, but the way he wrote it mischaracterized what the Board is actually doing. One of the Board’s key missions is regulation of hospital budgets, but an even more vital task assigned by the Legislature is to oversee the way that money flows through the system; that function is why the Board is a quasi-legislative body, rather than a quasi-judicial one like the Public Utility Commission.  
       The Smith idea is probably too far off the wall to get real traction, but it’s worth watching because Smith is expressing sentiments that are out there in the environment.
  • The Smith thrust illuminates another dimension of the reform environment that is surreal—the treatment of reform by the state’s press corps. Most of the press basically ignores it, probably because it’s very complicated and so becomes a minefield for overstretched reporters. The only organization to actually cover it over the last three to four years is VTDigger, and its performance has been, well, problematical.  I’ve written about that in the past, and I’ll revisit it soon.
  • The theme so far has been the surreal quality of the reform environment, but there is one overarching issue facing reform that is fully substantive and potentially a serious drag on the project. That element is the posture of the primary care doctors in the state. I say those doctors are more substantive because they are actually playing a key role in the outcome of reform, as opposed to some of the other players I’ve talked about so far. Phil Scott can hide from the reform issue; the Legislature can carp and maneuver around the edges; the press can wander in the health weeds—all without vitiating the complex dance underway between the Green Mountain Care Board and OneCare as they restructure the delivery system.
      The same is not true of the primary care docs. They are critical because of the provision in federal law that patients can’t be included in an ACO and thereby included in a capitated payment agreement unless they are “attributed” there by a primary care physician. There are about 700 primary care doctors in the state, and a significant number of them refuse to participate in OneCare Vermont.
       The effect of that posture is to block reform at hospitals in Rutland, Randolph, and Morrisville and to limit its scope in places like Bennington and Burlington. The 2017 and 2018 levels of participation in OneCare are fine; in fact, the feds would rather have the Vermont project ramp up slowly, rather than leaping ahead.
       It is also true, however, that the feds will require that the state have a very solid majority of the state’s population in capitated contracts by 2022. Reaching that target may not be possible without more primary care docs participating. That situation is fluid right now, and it’s not possible yet to assess it accurately.
       It’s difficult to come to a clear, overarching conclusion about the reform project at this point. It has no political leadership, but that has been true for the last two years and reform has continued to move forward. The Legislature is restive and massively ignorant about health care complexities, but it is not clear how that will play out; so far it hasn’t actually deflected the course of reform significantly. The press hasn’t been a substantive player to this point, and it probably won’t be unless either the Governor or the Legislature clearly sets out on a new course. That would require, I think, that the Legislature actually repeal Act 48, the foundational 2011 law setting forth the track for reform. I doubt that would happen, but who knows?  
       My intuition is that the current Legislative session will be critical. If the GMCB and OneCare emerge in June essentially unscathed by the forces of opposition then I think reform will have too much mass and momentum to be deflected. If not, well who knows?
       What I hope to give my readers is the best analysis I can for the issues I’ve listed above; and the closest watch possible of all the players over the next four months. Stay tuned.

Milestone: CHAC Abandons its ACO

by Hamilton E. Davis

   CHAC, an organization of federally-supported primary care doctors, announced yesterday that it would abandon its five-year effort to operate its own Accountable Care Organization (ACO) in a challenge to the primacy of the much larger ACO OneCare Vermont, which is spearheading the health care reform effort in Vermont.
   CHAC spent two years negotiating with OneCare about establishing a single, overarching ACO to manage the transition from fee-for-service financing for health care to block financing, or capitation, before walking away from the effort earlier this year.
  The decision Wednesday by the CHAC board does not commit any of its member primary care doctors to participating in any of OneCare’s capitation contracts, but it clears away the single most important barrier to that development. And the CHAC press release asserts the organization’s support for the so-called All Payer Model, the putative structure of the Vermont reform effort.
   The first step in the reform effort is now underway in the form of a contract between OneCare and the state’s Medicaid agency to deliver all the medical services necessary to 31,000 Medicaid recipients in the northwest quadrant of the state for a fixed price of $93 million.
   OneCare recently announced that the reform effort would expand to roughly 120,000 Vermonters as of Jan. 1, 2018. That would include people whose health care is paid for by Medicare and private insurance, as well as Medicaid. The areas of the state involved as of Jan. 1 would grow to include the southern tier of Windham and Bennington counties, as well as some sectors along the state’s border with New Hampshire.
   The coverage is patchy, however, owing to the CHAC effort to maintain its own ACO. As of Jan. 1 there will essentially be no reform in Rutland County, nor in the areas served by Gifford Hospital in Randolph, or Copley Hospital in Morrisville. Under federal law, residents cannot be attributed to an ACO unless referred there by a primary care doctor.
   Nonetheless, the CHAC decision marks a significant milestone in what has become a grinding campaign to recast the health care delivery system in the state. I will assess the new development in greater detail next week, but I am appending here the CHAC press release since I have seen no notice of it in the state’s press.   

For Immediate Release

Contact: Dan Bennett, CHAC Board Chair

(802) 728-2304

October 18, 2017 -- MONTPELIER, VT – On October 18, 2017, the Board of Community Health Accountable Care, LLC (CHAC) decided to terminate its Medicare Accountable Care Organization Shared Savings Program agreement with the Centers for Medicare and Medicaid Services, effective 1/1/2018 and to conclude ACO operations. Vermont’s health centers will continue to work together with the state and their community partners to improve the health of the patients that they serve. This will include continued focus on the clinical goals of Vermont’s All-Payer Model.

“CHAC has always believed that a strong primary care system working with other community organizations is the cornerstone to a healthier Vermont and more effective health care system. CHAC is proud of our record, particularly on behalf of the Medicaid patients we served,” notes Dan Bennett, CEO of Gifford Health Care and Chair of the CHAC Board. In August, the Green Mountain Care Board announced that for the third year in a row, CHAC reduced the total cost of care associated with its Medicaid patients, achieving savings for Vermont’s Medicaid Program. Between 2014 and 2016, CHAC’s average total cost of care (expressed as a “per member per month” average) declined by approximately 5%, from $189.83 PMPM (2014) to $180.53 PMPM (2016). At the same time that CHAC reduced the Medicaid dollars spent on care, CHAC implemented clinical quality improvement guidelines in the areas of Congestive Heart Failure, Diabetes, Chronic Obstructive Pulmonary Disease, Depression Screening and Treatment, Falls Risk Assessment, and Colorectal Cancer Screening, and CHAC demonstrated significant quality improvement on quality of care measures.

CHAC’s Board determined that they would make a greater impact for their patients and in support of Vermont’s All-Payer Model by focusing on local collaborations and continuing their joint work on quality improvement and health reform readiness. Vermont’s health centers and their community partners will continue to meet regularly to develop and implement evidence-based clinical recommendations, analyze data for purposes of health improvement and cost management, and learn from each other’s innovative work. “We have numerous opportunities every day to do good work on behalf of our patients in our respective communities and as a statewide network of health centers and primary care providers,” notes Pam Parsons, CEO of the Northern Tier Center for Health and Vice Chair of the CHAC Board. 

CHAC will be winding down its ACO contracts in the coming months and will ensure an orderly close-out for all 2017 ACO programs, including the Medicare Shared Savings Program.

# # #

When the Only Journalism is Biased Journalism

by Hamilton E. Davis

   In the lengthening chronicle of Vermont’s health care reform project, one of the least remarked yet most important factors has been the performance of the press. It is a sad commentary that press coverage is one of the most difficult barriers that reform has had to surmount.
   There are two basic thrusts to this indictment. The first is that press/media coverage has been not good, bad or mediocre, but, for the most part, simply missing. The underlying reason for that is the now years-long collapse of the newspaper business model; there simply aren’t reporters out there to get the job done. Even with that excuse, however, there has been real dereliction here.
   There are some very solid reporters in the state: Paul Heintz and John Walters at Seven Days; Neal Goswami at the Rutland Herald and Barre Times Argus; Pete Hirschfeld at Vermont Public Radio; until recently, Kyle Midura at WCAX; and until a year or so ago, Dave Gram at the Associated Press. These writers and organizations do an occasional story on health care reform, but not one of them really understands the issue, and they completely ignore major movements in the reform saga, whose importance in both financial and social terms dwarfs most of what they do write about.
   The only news organization that actually covers health care reform is VTDigger, the news web site founded in 2009 by Anne Galloway, a former reporter and editor for the Times Argus. That ought to ameliorate at least somewhat the lack of interest in the rest of the press corps, but it doesn’t. For the Digger coverage is badly skewed; it routinely reports material that supports a specific narrative, and ignores material that runs contrary to that narrative. Digger’s stories have regularly flouted journalism’s most basic rule—fairly reporting both or even multiple sides of a story. Unbalanced journalism like Digger’s is particularly damaging to public policy when there is no other coverage at all.
   What is the evidence for such an indictment?

Count One

   In my view, the evidence has been piling up for the last three years, but by happenstance an amazingly clear instance showed up just a few weeks ago, on Aug. 28. It’s worth starting this exercise by looking at the VTDigger story that ran that day under the headline “Regulators may tie pay parity to hospital budget process.” You can read it at this link, or Google it yourself.
   The story was written by Erin Mansfield, and I want to make it clear that my opinion about the quality of Digger’s journalism applies only to Mansfield’s reporting on health care, not to the journalistic work on other topics by either Mansfield or other Digger reporters. I also want to make it clear, however, that the responsibility for egregiously bad reporting lies not just with the reporter, but with the top editor, Anne Galloway. Galloway has backed Mansfield’s health care reporting every step of the way.
   The top of the pay parity story illuminates the way bad reporting can skew an issue to the point where it disconnects completely from reality. The story opens with a sketch of the narrative that Mansfield, along with several of the players in the health reform sandbox, have worked hard to establish over the last few years.
   The principal villain in this narrative is the University of Vermont’s health care network, which is based on the UVM Medical Center in Burlington, and includes its partner, Central Vermont Medical Center in Berlin, and Porter Medical Center in Middlebury, which is in the process of joining the UVM network. The network also includes three hospitals across Lake Champlain in New York. (The New York issue will be the second count in the indictment). Lesser villains include OneCare Vermont, the Accountable Care Organization established by the UVM network and Dartmouth-Hitchcock, the academic medical center just over the New Hampshire boarder; Blue Cross, which has been complicit in steering too much money to UVM; and the Green Mountain Care Board itself, which has been supine in the face of UVM and OneCare’s power and has dragged its feet on legislative demands to cut UVM down to size.
   The good guys in Digger’s narrative are HealthFirst, a small group of independent physicians, whose executive director Amy Cooper, has led the HealthFirst assault on UVM; Sen. Tim Ashe and some of his Senate colleagues, who have argued that the future of Vermont health care depends on independent physicians; BiState Primary Care; and its close partner, Community Health Accountable Care, which is comprised of most of the Federally Qualified Health Centers in the state—groups of primary care doctors that get financial government help to keep them in place, mostly in rural areas.
   Those are the players and that is essentially the narrative that Digger has sought to establish. Look at the article on pay parity, which means paying academic medical providers less and other providers more.
  The subject of the Board discussion was “how to reduce disparities, which independent doctors have been seeking to do for years,” Mansfield wrote. The majority of independent practices are in Chittenden County “where many are either closing or selling to the state’s largest hospital, the University of Vermont Medical Center.”
    And: “HealthFirst has said doctors are often paid 250 to 350 percent more when they work for academic medical centers. The organization says the disparity is pushing doctors to sell or close their practices.” These numbers are completely bogus, because Blue Cross doesn’t report fees for professional services and overhead or facilities separately.
   As for the Board, Mansfield writes: “The Legislature has been passing laws for about three years in hopes of narrowing the gap, but lawmakers complained in April that the board has not done enough to implement changes.” That’s the Digger narrative, and here’s where the specific count of journalistic malpractice occurs:
    The August 28 Board meeting was held for the purpose of laying out the Board’s research project on pay parity, which showed that the entire narrative was simply rubbish. The grounds for that was not simply an array of contrary opinions by this authority or that, but was rather the findings of an unprecedented survey of doctors in Vermont.
   The survey, which you can read at this link, was designed by Board member Jessica Holmes, an economist on the faculty of Middlebury College, and reported the views of 404 Vermont doctors. Those views were crystal clear. They don’t care very much at all about the disparity in payment rates.
   What they really hate are the administrative burdens of independent practice. They also dislike the Medicaid reimbursement rates; and they worry about how reform models might affect their practices. They also worry about the certainty of their incomes, not the size of them. And so far from being pushed to sell out to UVM or giving up practice altogether, the great majority plan to continue practicing just the way they do now.
   As the report said, after summarizing physicians’ dislikes about the medical practice landscape in Vermont: “Even with these frustrations, most clinicians plan to continue practicing in the coming years as they are today.”
   There is definitely a move to consolidate practices, and the claim by players like Ashe and HealthFirst is that the trend is driven by a combination of rapacious acquisitiveness on the part of UVM, along with the pay differential. However, what the survey showed is that the consolidation movement has little or nothing to do with differential reimbursements to UVM but is simply a local manifestation of the same trend that is going on all over the United States. I wrote a lengthy report on the survey on my blog, A Vermont Journal, under the heading “GMCB Survey Blows up Ashe Argument.”
   The survey was a striking departure from normal regulatory practice. It was designed, as I said, by Jessica Holmes, a Yale-trained economist; it was carried out very rapidly by the GMCB staff; and it had a very high response rate for such endeavors—400 of the roughly 2000 doctors in the state. It seemed to me to be close to peer-reviewed technical journal quality. And it absolutely zinged the whole Ashe, HealthFirst, et. al. campaign.
  Anyone who seriously cares about what happens to the Vermont health care system would benefit by looking at the whole thing. You can read the survey itself on the GMCB web site. You can also read my report on my web site at this link. See whether you think I got it.
  My point here, however, is about press performance. And the key takeaway there is simply this:
   The Digger story never mentioned the survey.
   There is no journalism theory on this planet to justify a performance like that. Mansfield often goes in and out of meetings, and an apologist for Digger might suggest that she simply missed it. The fact is, however, that following the staff description of the survey, the Board members spent a goodly length of time discussing how to react to it. And Mansfield’s story carefully picked its way through the discussion, working hard at reconciling their comments with her narrative, and ignoring the striking difficulty the Board members had in trying to figure out what to do in light of the survey findings.  
   The situation was laid out clearly by Holmes herself. The survey was meant to try to comply with the legislature’s insistence that the board deal with disparities in pay. Holmes said there was no question the claims about damage to the system from them was disproved by the survey itself. The problem, she said, is that while the sentiment of the Legislature is clear, trying to drive changes in the way insurance companies reimburse doctors and hospitals is very complex, and potentially very expensive.
   Moreover, the Board needs to keep in mind that the whole thrust of Vermont reform is to shift from fee-for-service reimbursement to block financing, or capitation. The first contracts in that effort have been in place since February, and the project is on track to expand in 2018, and the whole point of the Vermont reform is to render fees for specific services moot.
   It’s a house of cards, she said. It might be better not to monkey around with it.
   Con Hogan, who retired from the Board a week or so ago, said he agreed with Holmes on that point. He said he wouldn’t want do anything that would interfere with the movement of independent doctors into OneCare Vermont, the Accountable Care Organization that is the vehicle shifting from fee-for-service financing to capitation.
   Board member Robin Lunge also sounded amenable to such a strategy.
   But then the chair, Kevin Mullin, stepped in. “That’s just not going to cut it,” he said of the idea of bypassing the problem of trying to tell commercial insurance carriers how they should pay providers still operating under fee-for-service. That was the quote Mansfield needed to drive her narrative, which supports the Senate’s effort to support independent physicians.
   There is nothing basically wrong with that—Mullin’s view is critical and needed to be reported. The problem was that in the Digger story no one could know about the survey that so severely undermined the argument made by Ashe and the Senate. That’s biased journalism. It could go straight into a journalism textbook.   

Count Two

    In an issue that arose out of this summer’s hospital budget hearing, Digger jumped at the chance to take an easy shot at UVM for its management of the New York State segment of its network. UVM owns three hospitals in New York; the largest is in Plattsburgh; the others are in Malone and Elizabethtown. A fourth, a small hospital in Ticonderoga, will down-size to a clinic and be managed as part of the hospital in E-Town.
   Two of the hospitals have lost money in the last couple of years, and Digger began to pursue the question of whether UVM had bailed them out, and in the process sent Vermont money to New York. Is UVM using our money to subsidize New York, was the question. Digger ran three stories on the issue, with the theme that UVM is apparently using Vermont money to bail out the basket cases to the west. A subtheme was the proposition that UVM was hiding the facts from the public and the Green Mountain Care Board. They got a boost from Kevin Mullin, the chair of the Board, who bought right in to the narrative.
   The first story was straightforward enough, laying out the financial problems that had plagued the Plattsburgh and Malone facilities since before UVM got involved; and reporting Todd Keating, the network’s financial officer, comments on how UVM would help the New York units to improve, but would not “subsidize” them.
   A week later, however, Digger ran a second story to the effect that UVM was transferring money to New York hospitals. Keating was “backtracking on recent statements about whether the network’s flagship hospital transfers money to hospitals in New York,” the story said. UVM had sent $7.5 million to Plattsburgh to cover a budget shortfall.
   In the wake of all this back and forth, Marc Stanislas, member of the UVM network’s finance team, provided the Board with a detailed analysis of all the money transactions between the Vermont and New York elements of the UVM network. It was the only hard data that exists on this tempest in a teapot and it fully illuminates the issue.
   The spreadsheet showed that by any measure, it is New York that is supporting Vermont financially, rather than the other way around.
   By far the most important datum is the $180 million that New York patients send to the UVM network for treatment at the UVM Medical Center and associated network units. That money pays for a significant piece of the UVM network’s fixed costs; it also enables UVM to provide a wider array of specialty services than they might otherwise be able to afford.
   The Digger stories, however, focused more on the much smaller internal financial transfers. That analysis is instructive, too. The Stanislas analysis covers the actual spending for fiscal years 2015 and 2016, the projected spending for 2017 (the current year), and the budgeted spending for FY 2018, which starts Oct. 1. It looks like this:

Hamtable.jpg

   So, there you have it. Over the four year period of the inclusion of New York’s three hospitals in the UVM network, a flow of more than $100 million to UVM, a huge plus in itself. And then there is the $180 million that will flow into UVM coffers in the coming fiscal year.
   Pretty much disposes of the whole “Vermont is subsidizing failing New York hospitals” issue.
   You won’t read anything about that in Digger, however. Doesn’t fit the narrative.

####

GMCB Survey Blows Up The Ashe Argument

by Hamilton E. Davis

      There has been a vacuum of political leadership of health care reform in Vermont since early in 2015, when the last of former Gov. Peter Shumlin’s credibility on the issue slipped away. The only effort to fill that gap has been mounted by state Sen. Tim Ashe, the Chittenden Democrat/Progressive who chaired the Senate Finance Committee in much of the design phase of reform, and now leads the Senate as President Pro Tem as we enter the execution phase.
  Ashe’s effort, which runs directly counter to the reform design adopted by the Legislature in 2011, is based on a straightforward, fairly simple argument. It runs essentially like this:
   The health care system in Vermont is now dominated by hospital-based doctors, especially those at the University of Vermont, but its real future should lie in building the strength and influence of independent physicians. These physicians now get paid less than their academic counterparts for essentially the same services, and because of that disparity, many are retiring or leaving the state. That trend must be reversed if the Vermont system is to thrive in the future.
   The Ashe theory is invalid on virtually every dimension normally considered by the health policy community, but it is very powerful in Vermont, for several reasons: one is that it appeals to the common American view that competition is the answer to all issues of cost containment; another is that it invokes natural sympathy for the David-versus-Goliath aspect of the case; still another is the near- total absence of competent press coverage that should be a natural corrective to political fantasy.
   The single most important factor, however, is the total success of opponents of reform to paint the University of Vermont as a malignant influence on health care in the state. That argument has been pressed hard by Ashe and some of his Senate colleagues; by some of the primary care community in the state, and by VtDigger, the web news site that carries out the only press coverage of health care reform.
   A result of this dynamic is that the Ashe plan, if I can call it that, dominated the 2017 legislative session. The only reform issue considered, or even discussed, by lawmakers was the effort to reduce or eliminate any payment differential by insurance carriers to academic physicians and independents.
   Which brings us to the Green Mountain Care Board. The Legislature (the Senate, really, because the current House has no visible presence on health care reform) demanded that the Green Mountain Care Board adopt as its principle thrust the so-called pay parity issue. The Board has utterly failed to do its job on this issue, the Ashe argument ran, and they better get it solved now and provide an answer by Oct. 1.
   In response to these pressures, the Board carried out a near journal-quality research project in a three-month period—and simply blew the whole Ashe fantasy to smithereens.
    I have never seen anything quite like it. It was sort of--actual science, which few government bodies ever attempt. The architect was Board member Jessica Holmes, the Yale-trained economist whose day job is teaching at Middlebury College. Holmes designed a survey of doctors in the state and got 404 responses. The key takeaway was that the pay disparity issue at the center of the Ashe theory was, at best, a minor issue.
   The Board’s staff presented the survey findings Board members at their meeting on Aug. 28. The following were the “Takeaways” from the survey listed in the report:

1.      Independent clinicians like the autonomy and flexibility that running their own practice provides while employed clinicians like not having to deal with the burden and high costs of running their own practice.

2.      Both independent and employed clinicians are frustrated by the administrative burdens.

3.      Independent clinicians identify the uncertainty of their income as a frustration whereas employed clinicians identify the level of their income as a frustration. (emphasis is in the report)

4.      Whether independent or employed, the greatest threats to practicing in Vermont are seen to be regulatory/administrative burden, health care reform payment models and Medicaid reimbursement.

5.      Even with these frustrations, most clinicians plan to continue practicing in the coming years as they are today.

   Pay particular attention to four and five. The problems facing independent docs are paper work, potential changes in their industry structure, and the uncertainty—not the level—of their payments. And so far from leaving the state, most of them aren’t going anywhere. To the extent that some independents decide to affiliate with hospitals, it’s basically to deal with those problems, rather than resentment about pay disparity with the UVM network.

   The data looked like this for independent physicians:

Frustrating factors:
Administrative burden                    68 percent
Uncertainty of my income              49 percent
Burden of running own biz.           46 percent
Technology problems                     30 percent
Level of my income                        22 percent
Responsibility for practice costs    21 percent
Long hours                                      21 percent
Limited time with colleagues         9 percent

A slightly different cut at it:
Greatest Threats to Independent clinicians:
Admin burden                          44 percent
Health reform models              34 percent
Medicaid reimbursement         33 percent
Commercial reimbursement    31 percent

   That last figure is the only one that gets at what could be the Ashe theme. But Holmes said in the interview that the burden of the survey is that recasting the commercial fee-for-service rates would have no chance to affect the outlook for independent physicians in the state.
   Fascinating. Ashe and his allies in the Senate are wearing no togas, at all.
   That wasn’t the end of it, however. The Board members, having heard a staff presentation of the survey findings, discussed it at length. And in the process disclosed the political tensions that lie at the heart of health care reform.
   Jessica Holmes led off the discussion by suggesting that since the survey had shown that the pay discrepancy was not a major factor for independent physicians, and further that trying to regulate commercial payment rates was highly complex and could easily have unintended consequences; and still further, that since the state is already moving toward a system in which reimbursement by rates is already giving way to block payments, that it might be wise not to “monkey around with it…this is a house of cards.”
   Con Hogan said that he agreed. “I would not want to do anything that would get in the way of the ACO,” he said. He was referring to OneCare Vermont, the Accountable Care Organization that is the vehicle for moving from fee-for-service to capitation. Robin Lunge also seemed sympathetic to the Holmes suggestion. But then the Chair, Kevin Mullin, stepped in.
   Deferring action until more of the system is under capitation “is just not going to cut it,” he said. He asked the staff to reread the “statutory charge” from the last Legislative session, which directed the Board to take action now to reduce or eliminate the pay differential. That pretty much derailed the Holmes suggestion, at least for now.
   If the survey was an extraordinary development in a complex situation, so was the reaction to it. The whole Ashe campaign is wrong-headed, but he still controls the Senate. So, the survey threw into sharp relief a critical question: what happens if the Legislature essentially tells the Green Mountain Care Board to abandon the shift to capitation and turn back to fee-for-service? It was illuminating in this regard that when Mullin asked to have the statutory charge read, neither he nor anyone else on the Board thought to note that the recent legislative directive is not the only one.
   The far more important charge by the Legislature is the one issued in Act 48, the original health care reform legislation. That charge was to get the system to sustainable costs by moving to capitation, and overseeing the necessary restructuring to meet that goal…directing commercial carriers to pay providers in a certain way does nothing to further the real reform project.
   The Board discussion of the survey does not conclude its management of this issue. The staff and the Board members will continue to mine the survey further and could add to or modify their conclusions before they submit their report to the Legislature on Oct. 1.
   Still, the survey moved the needle on the reform project. For the first time in two years there is hard evidence to show that anti-reform, pro fee-for-service argument is fatally flawed. How much effect that evidence will have on the reform project, however, is still impossible to tell.

                                                           ####

The Salary Issue: Comparing Apples to Trucks

by Hamilton E. Davis

  In an earlier post I described the shift now underway from the theory of health care reform in Vermont to the practice thereof--planning giving way to execution. To me, the execution is problematical for many reasons, but one of the most troubling, and the one almost never remarked, is the performance of the state’s press corps. The latest example of that is now before the public in the form of stories about the salaries paid to executives of non-profit hospitals.
    The flash point of the current stories is the disclosure that John Brumsted, the Chief Executive Officer of the University of Vermont’s health network, was paid $2.2 million last year, based on the latest federal reports. The weekly newspaper Seven Days used the Brumsted salary, along with those of the other Vermont hospital CEOs to raise the question: “How Much Should Nonprofit Hospital CEOs Earn?”
   The story needs to be read in the light of a years-long campaign on the part of several players—the Left in the Legislature, some smaller hospitals, and some independent and primary care doctors—to disparage UVM as a dominating and nasty player in the health care community. The factual underpinning to that effort is bogus, but it has been effective.
    That effect is illustrated by the Seven Days story. While the story itself is competently reported and written, the framing of it—using the non-profit community in Vermont to assess whether UVM’s financial structure is justified—is simply preposterous.
   As the story says, the average leader of a non-profit in the state makes $83,000 per year. So, the idea that one of those non-profits could pay $2 million per year is shocking, unbelievable, who could credit it, the horror, the horror. Okay, this is comparing apples to tractor trailers. The average non-profit in Vermont is tiny; it has a handful of employees; and while many of those organizations do very good work and are an ornament to the state,they have no relationship to the UVM health network.
   Brumsted runs the biggest and most complex organization in Vermont. It consists of the UVM Medical Center, Central Vermont Medical Center, and is now integrating with Porter Medical Center in Middlebury; it also includes hospitals in Plattsburgh, Malone and Elizabethtown, New York. Nothing like that size and complexity exists in Vermont.  
  Every day, Brumsted has to manage an organization with a $2 billion budget and some 12,000 employees. He is responsible for the delivery of nearly 60 percent of all the medical care available in Vermont. And all of the most sophisticated, tertiary care in the state, as well as northeastern New York. Moreover, he has been the driving force behind the Vermont project to shift the reimbursement system in health care to block financing, the key to getting costs in health care under control. That is attested to by the federal government’s health management officials, who are asking that Vermont show the way to the rest of the country. UVM is willing to set hard spending targets within the Green Mountain Care Board caps--and guarantee to hit them. 
   There's more. The UVM system is often derided as more expensive than the rest of the hospital system in Vermont...the fact is that UVM is less expensive than the rest of the system on a cost per capita basis, the only metric that matters in getting costs under control.  
   So, is Brumsted’s salary too big? Who can say? The reality, however, as the
Seven Days story notes, is that Brumsted’s salary is routine in a national context. In the long run, therefore, Vermonters will have to decide whether they want a national class health care facility available in the population center of the state—or not.
   If they want it, they will have to pay for it. And it’s not just Brumsted that will get paid the rates prevalent in a national market. If you are going to manage a two-billion-dollar budget, you’re going to need a national class finance guy like Chief Financial Officer Todd Keating, and if you don’t want to pay high six figures you’re not going have him. If you need to recruit, retain and get high quality performance from 800 to 1000 doctors you’re going to need somebody like Chief Medical Officer Dr. Steve Leffler, and you’re going to have to pay him, too….
   Looked at in this context, the answer seems obvious: The UVM medical system is essential to Vermont’s economy, and to the quality of its society. If Vermonters decide they want to downgrade UVM, they will be able to do it. But they can then start traveling to Boston or New York to get care for the most difficult and often life-threatening problems. If they do that, the cost will be twice as high, not to mention how difficult it would be for lower and middle income people to access tertiary care at all.
   The problem, of course, is that many of the players don’t look at it that way. No one can expect the ordinary Vermonter to relate to a two-million-dollar salary. What is striking is that many of the central players in the health reform domain have been in the forefront of the denigrate-UVM campaign. One has been HealthFirst, the small organization made up of independent primary care and specialty care doctors, which has routinely testified to the legislature that the UVM system has been lying about its organization, as well as claiming UVM’s quality is bad. There is no evidence to support those claims. Another is the Champlain Valley Area Agency on Aging, whose chief told the Legislature that the problem with the Vermont health care system is that the “big fish is gobbling up all of the food.” There is likewise no evidence for that proposition. 
   A third, arguably the most important, is the Vermont Senate, which has been led into an anti-UVM posture by Sen. Tim Ashe, the Chittenden County Democrat/Progressive. Ashe has regularly promulgated the too-big, gobbling up theme.
   None of this means that UVM is beyond criticism; but much of it is simply wrong headed. Seven Days ran a cover story a couple of years ago arguing that the UVM Medical Center was just way too big and domineering, laying the foundation for the “gobbling up the little fish” theme. That story came at roughly the same time that UVM’s real and very serious shortcoming—the access problem posed by long wait times for elective services—was becoming clear. The real problem, in other words, was that the Medical Center wasn’t too big, it was too small…
   In any event, the public in Vermont gets nowhere near enough information from the Vermont press corps to begin to understand the stakes in the reform issue. A major reason of course is the general collapse of journalism generally owing to the fragmentation of its audience by the Web. In the light of that, it’s important that whatever coverage there is needs to be balanced, and we are not getting that. Not even close. That indictment runs across the board.
   Example: 
   The day after the CEO salary issue roiled the reform environment, Brumsted and his executive team spent four hours testifying before the Green Mountain Care Board about the UVM system’s plans to completely rework the way health care will be delivered and financed in its service area. That plan is the leading edge of the effort to render health care affordable not only in Vermont, but in the United States as well.
   Maybe it will succeed, maybe it won’t. But the readers of Seven Days won’t know anything about it all. Seven Days was nowhere to be seen. Neither was the rest of the press corps, the wire service, the major newspapers, the electronic media. The press drops in on an occasional health care reform issue, but there is no reliable coverage at all.
   The single exception to that conclusion is Vermont Digger, which delivers the only consistent and aggressive coverage on health care reform in the state. The problem with Digger is that its coverage is nowhere near balanced. 
   I'll get to that issue next.

Can Reform Succeed in Vermont Without Political Leadership? - Part 2

by Hamilton E. Davis

   One of the most dispiriting things about the recent course of health care reform in Vermont has been the loss of political leadership for the project. The technical aspects of reform are in excellent shape, but considerable opposition lurks out in the delivery system and in the political arena, and the most effective way to manage that is to talk about the issues candidly. That is not happening now, which is a threat.
  On the surface, the reform machinery continues to chug along. The Green Mountain Care Board is now analyzing the Fiscal Year 2018 hospital budgets that begin Oct. 1; and those budgets are in better shape than they have ever been. The state’s Medicaid agency is negotiating with OneCare Vermont, the big Accountable Care Organization, to extend five fold the number of Medicaid recipients covered under fixed price contracts. The federal government, meanwhile, is preparing to move a piece of the Medicare population to OneCare on the same fixed price basis. Vermont leads the country in the campaign to wrestle health care inflation to a sustainable level.
   Yet, that progress is mostly the result of momentum from the earlier stages of the project when the architecture for the project was being designed and put into place. Now, we are entering the very difficult execution phase of the project and we are doing so with an entirely different team on the field. We have a new governor and executive branch health care team; we have new leadership in both chambers of the Legislature. And the Green Mountain Care Board has turned over its membership almost completely.
   One result, it seems to me, is that we have lost the ability to communicate about health care in any effective way. The new governor, Phil Scott, a Republican, has had basically nothing to say about the health reform project he inherited from his predecessor Peter Shumlin. On the key issue involved—the shift in reimbursement from fee-for-service to capitation—Scott said shortly after taking office that the first step then underway in the northwest quadrant of the state was just an experiment and that we could dump it in the fall if it didn’t seem to work.
   In that early statement, Scott didn’t mention that the state, the Green Mountain Care Board, and federal Medicare and Medicaid officials had already signed an agreement in the fall of 2016 to extend capitated reimbursement to a portion of Medicare population as of Jan. 1, 2018; an implicit part of that agreement was that the Vermont Medicaid agency planned to increase the Medicaid population under a capitation contract in 2017 significantly in 2018.
   There have been some indications recently that he will sign on more fully to an expansion of the project in 2018, but he has never made it clear to the public where he stands on it. In the political world, no person is more important than the Governor and no policy initiative, particularly one as vital as health care, can do well if he isn’t prepared to assure the public that it is a good thing. One of the most common and effective defenses for falling short in the health reform project is failing to understand it. That excuse is not available to Scott. He almost certainly has but a shaky grasp of reform complexity, but he has three of the best policy experts sitting in the upper reaches of his administration—Al Gobeille, who lead the Green Mountain Care Board for the last few years and is now Scott’s Secretary of Agency of Human Services; Cory Gustafson, who managed reform in the state house for Blue Cross; and Michael Costa, the financial wizard who handled the financial dimensions of reform for the Shumlin administration…Scott could take a solid position on reform, but nothing he has done or said so far has anything to do with leadership.
   The Green Mountain Care Board is doing its basic job, but it doesn’t actually say much of anything about the difficult issues of refashioning the delivery system. That is understandable because two of the five members—the chair, former state senator Kevin Mullin, and Maureen Usifer—have been in place only since mid May. My impression is that Mullin is both tough and smart and he is coming up to speed very rapidly. But there is no way to tell yet whether he will choose to take a politically active role in explaining the complexities of reform to the public, the Legislature and the press.
   For its part, the legislature has basically split on health care reform. The House has not played a decisive role in the issue, content to try to keep up with developments but not trying to affect the course of reform in anyway.
   The main legislative activity has taken place in the Senate, which has been very active in trying to affect the course of reform. Unfortunately, that effort has headed in precisely the wrong direction to the point where the Senate at this point should be considered a potential barrier to reform. That’s just my view, of course, but it is noteworthy that none of the major players have anything to say about it. That shortfall is exacerbated by the nature of the press coverage, or more accurately, lack of coverage. (That will be the subject of Part 3 of the series)
   The effect of that is to open the way for reform opponents within the doctor-hospital community, and within the Legislature, to frame the issues so as to support their positions. The central pillar of that position is the claim that we ought to stick to fee-for-service financing and oppose the kind of system integration necessary to enable capitated financing.
   There is no medical merit to those claims, but they are certainly understandable, given that the kind of shifts necessary to effectuate reform will have a powerful effects on the financial flows through the system, as well as the culture in which medical care is delivered. The health policy community, as well as the federal government, know the change has to be made, but that doesn’t mean the doctors and hospitals involved have to like it. And many of them don’t.
   I’ll go into the opposition from some doctors and hospitals in a future post. For today, I am going to focus on the Senate, because its opposition has no policy justification and no real political rationale either.
  It has become obvious over the last couple of years that when the reform legislation passed in 2011, nobody, or almost nobody, in the 180 member Legislature really understood what he or she was voting for. That’s very often true in legislatures, particularly those like Vermont, which have part time office holders with no individual staffs. Moreover, the health reform legislation was incredibly complicated to the point where I would assert that even the architects of reform, like Wallack and Kimbell, never fully grasped how gnarly it would be to go all the way to a sustainable system.
  Still, even on complex matters, there is usually a handful, maybe a small handful, of members of the Legislature who make an important issue their own, who work at it very hard, and for the most part, “get it.” When I was in the Vermont House in the early 1990s, one of those was Paul Harrington, now the executive vice president of the Vermont State Medical Society. Harrington was a Republican, but he was the only one that Ralph Wright, the powerful Democratic Speaker of the House, trusted to handle nasty, complex little devils like, say, an insurance bill. Harrington would be working by five a.m. every day to master the bill, and when he said it was ok to pass, everybody voted for it. Most never read it. I know I didn’t.
   Another example: when the Vermont Supreme Court dumped school financing reform into the Legislature, two Democratic members of House Ways and Means, Paul Cillo and John Freiden, made the issue their own, and they designed and managed the reform bill to passage. They knew every nuance and number possible—“Paul, what will be the effect on the property tax rate in Brownington?” A legislator didn’t need the executive branch. He or she could get anything needed by asking John or Paul in the cafeteria line…
   Nothing like that has happened with Health Care reform. Which isn’t because the issue was ignored. The House set up a committee just to deal with health care reform. The Senate dealt with the bill in Senate Health and Welfare and Senate Finance. The two chambers also established a joint committee called the Health Reform Oversight Committee (HROC)—dubbed H-Rock in the state house. H-Rock consisted of the chairs of the two policy committees—House Health Care and Senate Health and Welfare—and the four “money” committees--House Ways and Means, House Appropriations, Senate Appropriations and Senate Finance, six in all.
   I have sat through interminable meetings of the H-Rock group over the last two years and I have yet to hear so much as a syllable indicating the members understood health care reform at all. The House committee and the House as a body have basically had no effect that I can see on the trajectory of the reform effort. The chair of the House committee over that time has been Bill Lippert, a Democrat from Hinesberg. Lippert made his bones as an effective chair of House Judiciary, but he clearly struggled when then-Speaker Shap Smith gave him the health reform committee. He appears to be coming up to speed now, but his committee hasn’t weighed in on the problems of the execution phase of reform…
   About a year and a half ago, I called the members of the H-Rock to solicit their views on how reform was going. The result was troubling—they didn’t have any. Mitzi Johnson, then chair of House Appropriations (now Speaker), brusque and candid. “I leave that to the policy committees,” she said. Bill Lippert didn’t call me back, but in the H-Rock meetings he made no secret of the fact that he was trying to “get his arms” around the subject. Jane Kitchell, chair of Senate Appropriations, a veteran legislator, was working hard at it, and her questions to the bureaucrats were often far more pointed than anyone else’s, but she didn’t have a real grasp of the subject. (She also didn’t get much help from the bureaucrats, but that’s another story.) Janet Ancel, chair of House Ways and Means, was also working at it, but her knowledge only went a couple of questions deep. I gave up before reaching Sen. Claire Ayer, chair of Senate Health and Welfare. I sat through some hearings of her committee though, and her grasp seemed superficial.
   That left Sen. Tim Ashe, the Democrat from Chittenden County, who was chair of Senate Finance and is the new President Pro Tem of the Senate. As far as I can tell, Ashe is the only member of the Legislature who is really trying to play an active role in how reform actually goes forward. The problem is that what he is doing makes no sense at all. In fact, Ashe represents one of the two or three most dangerous threats to reform as we move into the execution phase. Here’s why:

  • Keeping fee-for-service payments to independent doctors would simply retain the system that has been place since World War II. For more than half a century, that system has generated huge increases in health care costs, from roughly six percent of the Vermont state product to 20 percent today. The whole point of reform is to cut that rate of inflation.
  • The essence of the strategy adopted by Legislature was to assign the Green Mountain Care Board the task of overseeing a reorganization of the doctor-hospital system so as to permit the shift from fee-for-service to capitation, or block financing. The mechanism for reorganization is the formation of an Accountable Care Oganization, OneCare Vermont, which signed its first capitation with the State Medicaid agency for the current year, and which is on track to expand significantly as of Jan. 1, 2018. Under reorganization, “fees” begin to go away altogether.
  • Even if we were going to retain fee-for-service as the reimbursement structure for the Vermont system, there wouldn’t be anywhere near enough independent physicians to make a difference in overall spending. On this point it is necessary to distinguish primary care doctors from specialists. There are a significant number of independent primary care doctors, but we have to pay them more, not less—so no savings there. There are some specialists outside of hospitals, but not enough to deflect the roughly $2.5 billion hospital spending juggernaut.
  • The cause of independent physicians is appealing, especially in small-community, but the reality is that American medicine is rapidly moving away from that model. Medical students now lean more toward working for organizations, and the potential benefits from integration in both cost and quality simply can’t be ignored much longer.

   It is not clear what ultimate effect the Ashe campaign will have on the course of reform. It is clear that he can get what he thinks he needs from the Senate. He demonstrated that in the last legislative session when the Senate pursued a bill to force payers to change the way they pay independent physicians compared with how they pay hospital-based doctors.
   The bill in question, the Pay-Party proposal, ultimately failed because they ran out of time. It also didn’t help that the Senate bill was based on bogus Blue Cross numbers…that is a longer story in itself...

   What is clear is that none of the policy players--the governor, the Green Mountain Care Board, or the House--challenged the Ashe position that the main issue  facing the Vermont system is bolstering the position of independent physicians. That is simply absurd, but it is what Vermonters heard, if they heard anything, during the legislative debate. 

   A potential counter to that could be solid press coverage, but we don't have that in Vermont, owing primarily to the collapse of the newspaper business model in Vermont, as in the rest of the country. That fact is difficult enough, but the situation in Vermont is even worse, because we are seeing biased journalism.

   I'll get into that in Part 3 of this series.

 

######

The $60 Aspirin Syndrome - Part 1

by Hamilton E. Davis

   The Green Mountain Care Board had an illuminating epiphany last Thursday when they got their first look at the Vermont hospital budgets for Fiscal Year 2018, which begins Oct.1. Most of the figures were routine: net patient revenue for the hospitals, operating margins, inpatient and outpatient trends…the financial bones of a very complex system that costs the people of Vermont between $2.5 and 2.6 billion a year.
   For the first time, however, the Board’s financial team decided to look at the difference in pricing for various services among the 14 hospitals. The financial regulators haven’t tended to do that very much over the years. The Hospital Data Council didn’t do it at all in the late 1980s and early 1990s; its successor, BISHCA, didn’t do it much if at all in the late 1990s, and the oughts; and I don’t recall the Green Mountain Care Board doing it either, when it took control of the system in 2013. The primary focus over the three decades or so was net patient revenue, which was defined as the total amount of money Vermonters had to pay for medical care in hospitals. In 1987, when I was chair of the Hospital Data Council, we called net patient revenue the “Green Dollar Number”, the actual amount of money Vermonters had to come up with for health care each year.
   Now, the whole regulatory landscape has changed. The Board has a new chair, Kevin Mullin, and a new member, Maureen Usifer, neither of whom has seen Vermont’s hospital budgets before. Even more importantly, the financial team, which was run by Mike Davis from 1987 until his retirement just a few weeks ago, has new leadership also. Mike’s replacement is Andy Pallito, who came over from the Scott administration. Pallito has very impressive credentials—he has been running the finances of the whole state since 2015. But he has had only a few weeks to get his arms around the hospital numbers.
   So, it made sense for the first pass of a new team to look into what it costs to buy various services from each hospital. Their report laid out the prices for cataract operations, and colonoscopies, and broken legs, and heart failure, and knee replacement, and kidney infections, and office visits, and lab services, and MRIs—the whole miserable, amazingly costly symphony of modern health care treatment. The Board members looked at these numbers for a while, and then you could almost see their minds start to boggle. For at first glance, the numbers made no sense at all.
   Start with cataracts (known in the trade as lens replacement). The cost at Northeastern in St. Johnsbury: $9,572; at Springfield, $4,066, less than half, with the rest all over the place in between.
   Colonoscopy: at Northwestern in St. Albans, $2,064; at Gifford in Randolph, $5,426; at North Country in Newport, $4,583; At UVM in Burlington, $3,770.
   Best place to break your leg: Rutland, $6,379; at Gifford, a cool $31,941, five times as much; at Northwestern in St. Albans, $9,709; at Copley in Morrisville, $25,731.
   An MRI: at Northwest, $1,764; at UVM, $5,311.
   There’s more, but you get the idea. It was obvious within a few moments to the Board members that something unusual was going on, and that it would be necessary to dig deeper. What they will find out when they look deeper, is that the numbers make even less sense they did at first glance. Because the numbers lead right into the funhouse reality of health care financing.
   Why?

1.     The first thing to note is that the “costs” cited in the tables mean nothing at all. They come from the listed prices at the hospitals. Each hospital has one of these "charge masters." They don't mean much because  nobody pays the charges, and on the few occasions we have seen inside of that, the actual prices differ in ways that make no sense at all. Medicare and Medicaid pay what they feel like paying. In the private sector, half of the costs is paid by Vermont Blue Cross, MVP, and a few other carriers like Signa. All of the prices on the charge master fare are discounted. Beyond that, they are negotiated between the insurance carrier and the hospital in a dance between the hospital’s need to get as much as possible and the carrier’s need to spend as little as possible. It is a little bit like the sticker price on new cars, but only a little bit because you are never going find the same Chevrolet selling at five times at one dealer as it does at another. Everyone will tell you that the patient’s needs are paramount in the dance, which is the sheerest eyewash. The whole thing is about money and market share, and if you don’t believe that consider that the hospitals and the carriers actually sign contracts pledging never, ever to let anyone know what the actual cost is.

2.     The second critical point is that even if the prices in the charge masters were the actual prices, you would still have no idea which hospital was the most cost efficient. The reason is that the cost to the Vermont “tax” payer isn’t the unit cost, it’s the unit cost times the wildly variable volume of the service delivered. I laid out how that works in my last post.

   You can see an example taken from the current tables combined with work that I did several years ago.
   The sticker price of an MRI in the table was $5,311 at UVM and $3,960 at Rutland. That’s a difference of $1,151, pretty significant given that so many of these scans are being ordered that the MRI machines at both hospital are working overtime. Looks like the thing to do is force the UVM price down to Rutland’s. That might be a good idea, but there is no way to test it because you can’t find out the per capita rates of MRI use going on in either the UVM or the Rutland service area. That data used to be reported regularly, and I looked at it all the time, first as a journalist and then as a regulator, in the 1980s and early 1990s. By happenstance, one of the metrics I used then was the per capita rate of MRI imaging in Rutland and Chittenden County. I want to emphasize that I have no idea what the actual comparative rates are today, but when I checked it in the early 1990s, the ratio was two Rutland MRIs for every one performed in the UVM service area. And those figures were age adjusted; age being the most important demographic difference between service areas in Vermont. In other words, the raw data would have showed a larger difference in use rates.
   As an illustration, it is interesting to test which hospital in the MRI case was financially more efficient. Let’s take two hunks of population from each service area, each comprising 10,000 people and apply at a use rate of 100 per 10,000 in Chittenden and the corresponding rate of 200 in Rutland. Result:

                                       Chittenden-UVM                 Rutland

                                              $531,100                       $792,00

                                      Total Difference: $260,900

   Pretty interesting, eh? If you are responsible for the cost of health care in Vermont, which of these per capita use rates needs work? These kinds of differences are now reported routinely in something called the Dartmouth Health Atlas, which uses the techniques designed in Vermont. A particularly good look can be found here, a 2009 look by Atul Gawande, a Harvard  professor, at the  differing practice patterns at medical systems in Texas and Minnesota. 

3.     The above doesn’t begin to exhaust the funhouse dimensions of the health care financing craziness. Back in the early Pleistocene when I began working on this issue (1980) the iconic example was the $60 aspirin. Woman goes to the emergency room of the hospital because she is sick or hurt. They fix her up, and then she gets the bill. It’s fully itemized, prima facie evidence of integrity. So much for this, so much for that. And what jumps out at her first is the $60 for an aspirin (not a bottle of aspirin, one aspirin). Outrage all around. Can you believe it? The nerve.

   No problem fixing this—just look at the individual elements, substitute a number that makes at least some rough sense, and you’ve cut the cost by a third, maybe more.
   Sorry, won’t work. Because the $60 for the aspirin has no meaning at all. It certainly didn’t actually cost that much. The reality is that the bill is what the hospital has to get to keep the emergency room going at all. And at a larger remove, it isn’t just the money you need for the emergency room, it’s the money the hospital itself needs just to stay in business. That’s the number that really counts. Once you go inside that top number, it doesn’t really matter how you spread it around. If the cost of the scalpel looks a little high, cut it and increase the price of the peanut butter sandwich or the towels, or bandages or whatever. Just make sure that you get the total needed to keep the doors open.
   That doesn’t mean that the total cost in our ER example or anywhere in the system isn’t too high. It is and after 40 years of exploding costs in the American health care system it is clear even to the family dog that something has be done. The question is what, or how. The first step is to get a grip on how the whole mess works. And it is absolutely shocking how badly we’ve done on that in Vermont.
   I’ll defend that proposition in Part Two of this little series.

N.B. I said in my last post that the current one would be about the primary care physician problem in reform. Sorry about that: I couldn't pass up the epiphany for the Board on the unit cost issue. Primary care docs coming soon. 

 

                                                            

Vermont Health Care Reform: The Basics

   The Vermont health care reform project was born in 2011 when the Legislature passed Act 48, the basic reform law. The various players--doctors, hospitals, legislators, advocates of all sorts, the state administration, the press--have talked and written about it at great length. Yet the subject remains opaque to all but a tiny priesthood of adepts, and even they almost never speak plainly about what is going on. The following is an attempt to clarify the whole tortuous mess.

by Hamilton E. Davis

   Why do we need it?
   Because costs are out of control. By costs, I mean the money we spend on doctors and hospitals to deliver medical care. There are other costs in the overall system, like paying for health insurance administration and the like, but the engine is spending on doctors and hospitals. In 1966, Vermont spent just over six percent of its gross state product on health care; now it spends 20 percent. No serious person thinks this trend can be allowed to continue.

   How do we fix it?
   The strategy that Vermont adopted in 2011 was three pronged: The first step aimed at slowing down cost inflation by traditional regulation. That function was to be carried out by a new, five-member body called the Green Mountain Care Board. At the outset, the Board would tell hospitals how much they could spend. The first year of that process was 2013, and while the Board got rolled by the hospitals that year, it brought inflation down in the following years from the seven-to-ten percent range to the four-to-five percent range.
  That helped, but it was still not sustainable. An acceptable inflation rate a level estimated at about three percent, which is the long-term increase in Vermonters' ability to pay.
   The second prong was to shift the reimbursement in the system from fee-for-service to capitation, in which a group of doctors and hospitals provide all the necessary care to a block of patients for a negotiated price. Such a shift required that the doctors and hospitals in the provider group cooperate with one another rather than competing. In the health policy field nationally, that strategy is considered essential, because 50 years of experience has shown that traditional regulation does not work. With capitation, doctors and hospitals take financial responsibility for the system they run.
   The third prong in the original Vermont plan was to shift the private sector health spending in the state away from insurance companies, individuals and self-insuring companies to the Vermont tax system. The understanding was that such a shift, about half the cost of acute care, could not take place until spending in the Vermont system was firmly under control, meaning that spending would be three percent or less year over year. Then-Gov. Peter Shumlin abandoned that leg of the stool in late 2014. Full government financing is dead for now, but there is nothing to prevent it from reconsideration if the costs are sustainable.

   Why not base reform on market forces?
    That question gets at the essence of the reform strategy. There are two core realities that are driving the reform process, and the inability, or unwillingness, of many of the players to deal with them go a long way toward explaining why the reform process has been so slow and difficult.
   The first reality is that delivery of acute health care is wildly variable. The inclination of doctors to order, or not order, tests like MRI; or to do a wide variety of surgical or medical procedures, can vary by two to five times; and years of research has shown that such variations cannot be explained by physical differences in the patients treated. The excess care delivered in the system both wastes money and constitutes poor quality.
   The second reality follows from the first. That reality is that the “cost” of health care services is not equal to the “price” for each episode, but the price times the volume of care. Whether a person is healthy or not, he or she pays the total cost for care, because it is spread across the population by state and federal taxes, and by insurance premiums on the private sector side. The critical consequence of that is that competition raises costs, it doesn’t lower them. In the health policy biz, it’s called “supplier-induced demand.”
    Both these themes are powerfully counterintuitive: when we go to the doctor and he or she says we need this, that or the other, it just seems to make sense that, in fact, we must need this, that or the other; as for competition, the idea that competition is necessary in an efficient economy is close to an American religion, right up there with motherhood and apple pie. Actually, motherhood and apple pie are second and third.
  This screed is supposed to be a summary of the essence, but the above is so critical that it calls for at least a few examples.

1.     For much of the 20th century, there were two community hospitals in St. Albans, Kerbs Memorial and St. Albans. Head-on competition every day. In 1974, the two hospitals merged. Then, total monopoly every day. Once competition went away, the cost-per-capita for hospital care in the St. Albans area dropped in half. That’s one divided by two. Fifty percent down. And it stayed there. In the early 1980s, I interviewed Dr. Francis Moore, a professor of surgery at Harvard Medical School and Chief of Surgery at Peter Bent Brigham Hospital in Boston. He occupied arguably the snootiest aerie in American medicine. When I told him about the St. Albans data, he said it was impossible; and that, even if it happened one year, it would surely reverse the next. He hadn’t seen the data.

2.     The most important scholar in this area over the last half century has been Dr. John Wennberg, originally from the University of Vermont College of Medicine and later at Dartmouth Medical School. Now retired, Wennberg developed the tools necessary to examine the patterns outlined above. One of his striking findings came in the comparison of costs of care in the Boston area to costs in New Haven, Conn. In Boston, three prestigious medical schools, Harvard, Tufts, Boston universities; prestigious hospitals all over town. The most over-bedded and over-doctored city on the planet. Ding dong competition every day. In New Haven, basically, there is just Yale-Haven Hospital. Yale is just as snooty as Harvard, but in New Haven, Yale rules the roost. Little to no competition, ding dong or otherwise. Wennberg’s finding: New Haven’s area cost per capita were half those in Boston. One over two, fifty percent. The New Haven dynamic can be seen in many other areas:  the Mayo Clinic in Rochester, Minn.; The University of Iowa in Iowa City; The University of Wisconsin Hospital in Madison; Dartmouth-Hitchcock in Hanover, N.H., and the University of Vermont Medical Center in Burlington. That pattern is common where you have a high-quality academic center in a relatively small area.

3.     My homely example: In a real market, if you want to buy a TV set, you might go to Costco, and see a set for $490; then Best Buy, where the price is $640 and some boutique place where it’s $925. Same TV. set. Pretty easy, eh? You order from Costo, and feel quite smug. If we now shift to the American health care “market,” however, Costco delivers eight sets, Best Buy delivers five and the boutique one. And you have to pay for what gets delivered because the supplier decides the volume…Your wallet just got hammered, like all our wallets have been hammered by health care costs for the last 50 years. The essential enabler of this process is fee-for-service reimbursement for doctors and hospitals. Rule of thumb: anybody that doesn’t get this doesn’t get health care.

4.     If you remain unconvinced, read Atul Gawande’s 2009 New Yorker article examining in detail the highly variable cost of expensive care between the Mayo Clinic in Minnesota and the Anderson system in McAllen, Texas. No serious health policy maven is going to argue with Gawande on this issue. The real question is what to do about it.

   What would the new system look like?
   In order to function efficiently, health care has to operate as closely as possible to a private sector company that has to produce a very technically complex product that satisfies rigorous quality requirements at a price the consumers can afford. The federal Obama care law sets out a way for health care units to accomplish that by joining together in something called an Accountable Care Organization (ACO). An ACO is a sort of baggy “company” that is managed by the doctors and hospitals themselves, without any one unit owning all the assets.
   Those units can’t compete with one another, any more than one section of a private company can compete with another. The guys who machine the cam shafts in a Toyota factory have to do so in a way that fits the overall design. If the cam shafts don’t mesh with the piston design, the car won’t run and the whole company is in deep trouble. The same thing is true of organizations making computers, or tractors or chain saws. Keeping people healthy is very complex and difficult in the best of circumstances; doing so without close coordination as patients move from one level of complexity to the next is ever so much more so. Is there an issue with management of an integrated system getting too much pricing power? Yes, which is why the Green Mountain Care Board has so much power to keep the lid on such an eventuality. In a big state, rich in health care assets, it might be possible to build ACOs that compete with one another. No such possibility exists in Vermont because there is only one source of the most expensive, most complex care. The same pattern holds in Iowa City, Madison and Hanover, as well as Burlington.

   How would the ACO work?
   The clearest way to demonstrate that is to look at the way the major ACO in Vermont is “taking risk” for the treatment of Medicaid patients in the northwest quadrant of Vermont. The ACO, called OneCare Vermont, negotiated a contract with the state Medicaid agency to deliver all the necessary care to 31,000 recipients that receive treatment at the University of Vermont Medical Center in Burlington, Northwestern Medical Center in St. Albans, Central Vermont Medical Center in Berlin, and Porter Medical Center in Middlebury, for a total price of $93 million. Central Vermont and Porter are part of the UVM health network; Northwestern is connected to the others by virtue of its participation in OneCare.
   Beginning last February, the state sent a check to OneCare for one twelfth of the agreed upon amount and OneCare sent a check for part of that to each of the four hospitals. All the care to the 31,000 recipients in the four hospitals has to be paid from that allocation. The critical point: 

There is no more money.

   There are a variety of details that go along with this structure, but the essence is plain enough. For the first time ever, the most important  part of  the health care system—hospitals and the doctors who practice there--are directly responsible for their own financial performance. In the biz, that form of reimbursement is known as capitation. It is the polar opposite of fee-for-service, and it is the only viable route to sustainable costs in Vermont’s health care delivery system, or in any other state’s delivery system, for that matter.
   The contract for roughly 20 percent of the Medicaid recipients in Vermont, while important, is still a relatively small piece of the state’s roughly 625,000 residents. However, OneCare and the state have signed an agreement to extend “risk contracts” to part of the Medicare population in the state beginning on Jan. 1, 2018. That will be a huge step. The Medicare population is the most politically important piece of health care puzzle. Medicare financing is the purview of the federal government, and the enthusiasm of the feds for the Vermont plan is the most important shift in the history of the issue in this state. As of the same date,  OneCare and Medicaid officials  plan to increase the number of Medicaid recipients under risk contracts from the current 31,000 level to around 100,000. And OneCare has talked to Vermont Blue Cross about risk contracts in the private sector. The OneCare budget for 2018 contemplates taking its total covered lives to roughly 135,000 four fold  increase.
   The Vermont performance so far has been sufficiently impressive that CMS, the federal Medicare and Medicare agency, has selected Vermont and OneCare to be “Next Generation” players who can lead the way to shifting reimbursement from fee-for-service to capitation; and to lead the integration of the delivery system sufficiently to carry that effort off. There are only 20 or 30 or so such “Next Gen” players out of hundreds of ACOs in the U.S., and even within that group Vermont leads because their structure involves both hospitals and doctors. CMS believes that if Vermont can wrestle costs into submission here the rest of the country could follow.

   Sounds good, any problems?
   Well, yes. Very serious problems, in fact. The principal one is that a big chunk, probably nearly half, of the primary care doctors in the state are either flatly opposed or are deeply ambivalent about reform. A second is that reform has lost its political leadership. The momentum that grew out of Peter Shumlin’s elections to the governorship in 2010 and 2012 began to erode in 2013 and has now vanished entirely.
   In the political vacuum that followed, the Vermont Senate went off on a pro fee-for-service tangent, lead by its new president pro tem, Tim Ashe, a Chittenden Democrat. In the absence of strong leadership from anywhere and with a new Speaker, Mitzi Johnson, the Vermont House wandered in circles to no visible effect.
  At the beginning of 2017, the Green Mountain Care Board lost its chairman, Al Gobeille, who left to run the Agency of Human Services (AHS) for the new Republican Governor, Phil Scott; another of the five-member body left the state. So the new Board drifted with just three members until a few weeks ago when the Governor named a new chair, former Republican State Sen. Kevin Mullin, and a new Board member, Maureen Usifer. The Board’s first act was to approve the construction of a stand-alone surgical center in Colchester, a terrible decision that, in effect, endorsed fee-for-service medicine and directly invited for-profit surgical player for the first time. There is no gainsaying the damage from that but it remains to be seen where the Board goes from here on.
   Mullin and Usifer are very new, but if they become strong players then the Board could assume the political leadership mantle.
   It us also uncertain what the Scott administration will do. Scott has two of the state’s most knowledgeable reform players in Gobeille, now Secretary of AHS, and Cory Gustafson, a former Blue Cross representative in the Legislature, who now serves as commissioner of the state'Medicaid agency. It is not clear yet what influence they will have on the Governor. Scott so far has been at best diffident about reform, and Jason Gibbs, his top aide, is considered to be an opponent.
   The executive branch will face a test in the next two to three months when it decides whether to provide funding to a group of primary care doctors that is committed to fee-for-service financing, and which has spent the last two years maneuvering against OneCare and reform. If the Medicaid agency spends its very-scarce money keeping the primary care group afloat, it and the Scott administration will lose their credibility with OneCare and the big hospitals, which are putting their financial futures at risk. The same thing is true for the Green Mountain Care Board. The Board isn’t directly involved in the primary care financing issue, but the members could weigh in on it, and if they support it, on top of their recent decision on for-profit surgery, then their credibility will go glimmering too....
   In short, very strong headwinds for health care reform. What we will see between now and Thanksgiving are answers to the following:

  • Where will the Scott administration come down on the choice between fee-for-service and capitation, competition or integration? Will Scott lead or just meander along?
  • Where will Kevin Mullin take the Green Mountain Care Board, and will Mullin be able to fill the leadership vacuum?
  • What role will the small community hospitals play in reform?
  • Will the non-hospital primary care doctors insist on a separate role for themselves, built on fee-for-service, or will they agree to integrate with the hospital system? And will the Scott administration support their efforts to operate as separate ACO?
  • How will the Fiscal Year 2018 hospital budgets affect the reform environment?

   These are just some of the issues shaping up now. In the health reform biz, the theory is clear. But in the political/policy world, the theory part is often the easiest part. It is the execution phase that is make or break. You can design the world's best automobile engine, but if you can't actually build it and make it work, all you end up with is a very expensive boat anchor. That is where we stand now with health care reform in Vermont. My own sense after watching the process since the early 1980s, is that the odds for full success run to just a little better than fifty-fifty.

   That assessment is based on my belief that all the players have to bring up their game, some of them by a a lot. The Scott administration has two of the best players in  the persons of Al Gobieille and Cory Gustafson. They have big jobs that extend beyond reform, but from the reform perspective both have been missing in action since January. Governor Phil Scott, meanwhile, has to decide whether to lead the parade or just wander along in its wake. The Legislature has to get real on the key issue of competition versus capitation. The Green Mountain Care Board has to get up to speed very quickly...all of these players assert that they support reform, they're in favor of it, they just love it, blah, blah, blah. The question is whether they play like they mean it.  And many of them don't.  

   The most immediate issue is how to manage the whole primary care doctor issue. That is very complex, but it's on the table right now. I'll look at that issue in my next post.  

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New Green Mountain Care Board Flunks First Test

by Hamilton E. Davis

   The Green Mountain Care Board, under new leadership and operating in a transformed political environment compared to the last six years, has just faced its first serious test—whether to approve the construction by a small group of doctors of a stand-alone surgical center in Colchester. The Board failed the test, approving the center on a 4-1 vote, thereby dealing a body blow to health care reform in Vermont.
   In purely medical terms, the proposed Green Mountain Surgical Center would be marginal to the delivery system. It will have two operating rooms and four procedure rooms procedure rooms and will deliver care that is not complex enough to require a hospital.
   The significance of the decision lies in the fact that it rested on a choice between two diametrically opposed views on how to pursue reform in Vermont. The health care reform project adopted by the Legislature in 2011 was based on the proposition that getting health care costs under control could only be achieved by shifting payment to doctors and hospitals from fee-for-service to block financing or capitation. That shift, the consensus view in the health policy community,  requires that the various elements in the system be integrated and run on a cooperative basis.
   In the last couple of years, however, opposition to the reform project has arisen on multiple fronts, including a sizeable block of primary care doctors, a smaller group of independent physicians (comprising both primary care doctors and specialists), the Vermont Senate, and several of the smaller community hospitals in the state. All of these players pledge total fealty to “reform”, but their opposition coheres in support for a system built on doctors and hospitals competing with one another, and paid by fee-for-service. Hence the choice:

   Integration and capitation versus competition and fee-for-service.

   There are all sorts of problems with the fee-for-service route. The most important is that fee-for-service with competing as opposed to cooperating units is precisely the system that has been in place since the mid-1960s and which has driven health care costs into the stratosphere. An example: from 2000 to 2009, virtually every Vermont hospital doubled its budget, a blowtorch rate of increase that was clearly unsustainable. The Green Mountain Care Board managed to cut that rate significantly, but still not enough; only system integration and capitation can take us the rest of the way.
   A second major problem is that the Green Mountain Care Board has already signed an agreement with federal Medicare and Medicaid officials to begin moving Medicare recipients into an integrated system as of Jan. 1, 2018, less than six months from now.
   A third problem is that the Surgery Center decision introduces for-profit health care in Vermont, a thoroughly pernicious idea that has been rejected by Vermont state administrations of both parties for the last 40 years.
   A fourth problem is that free-standing surgical centers threaten every small hospital in the state. The current proposal has been cast as a way to challenge the preeminence of the University of Vermont Medical Center, which the opponents of reform have spent the last two years vilifying as the Great Satan. The idea that the Colchester facility will seriously shift the trajectory of the UVM system is just silly. But a surgi center could take out small struggling community hospitals, like Gifford, North Country, Springfield and Copley. A couple years ago in its budget hearing the then president of Copley Hospital told the Board:

   Without Mansfield Orthopedics, we don’t have a hospital.

   It doesn’t get any clearer than that. The finances of small hospitals usually rest on the facility squeezing out every dime it can from less-than-tertiary severity surgery. Payment for surgery cases usually consists of a professional fee to the surgeon and a facility fee to the hospital. A common question heard in the payment debate is why hospital-based physicians get paid a facility fee whereas stand-along doctors don’t. There’s actually a straight-forward answer to that:

   You need a facility fee because you need a facility.

   Meaning a hospital. Stand-alone, independent doctors are all well and good, but when your teenager runs a car into a tree at three in the morning, you need a hospital. And if you’re going to have a hospital, you’re going to have to pay for it.
   The Green Mountain Care Board tried to square the circle on this whole mess by attaching a laundry list of conditions to the permission. A major one was the requirement that the Surgical Center participate in the so-called All Payer Model, which is the framework for shifting Medicare recipients into an integrated system with capitated payments. The applicant has enthusiastically said it will do that.
   It is a complex issue, but the essence of the posture of the independent physicians is that they want just that—to remain independent, rather than putting up with the variety of constrains involved in being part of a larger enterprise. So, fitting the new structure into a fully integrated structure with a different payment system looks like a very long reach.
   And while the permission law provides for the type of conditions attached here, 40 years of experiences shows that the conditions in cases like this seldom have much, if any, effect. Once a facility is built and is operating, the chances that the Board would shut them down for reneging on a condition are vanishingly small. Getting that toothpaste back in the tube is very unlikely.
   Hence the conclusion about the quality of the decision. In my next posts, I’ll try to assess the situation with the newly constructed Green Mountain Care Board and the prospects for reform going forward.

OneCare Vermont Drives Forward Despite Headwinds

by Hamilton E. Davis

    OneCare Vermont, the state’s primary Accountable Care Organization, presented its 2018 budget to the Green Mountain Care Board last Friday, outlining a major expansion of the state’s health reform project to include seven hospitals, up from four, and a shift of nearly $800 million in health care spending from fee-for-service to “risk” contracts, or capitation. That would amount to about a third of the total $2.4 or so billion spent on acute medical care per year.
   OneCare is now operating a more limited program—a $93 million effort that serves 31,000 Medicaid recipients in the northwest quadrant of the state. As of Jan. 1, 2018, the OneCare budget calls for expanding the Medicaid project and extending capitation to a portion of the state’s Medicare population, as well as contracting for the same system if possible with Vermont Blue Cross and Blue Shield for some of its patients.
   The expanded effort would bring an estimated 137,000 Vermont residents into what are called “risk” contracts, in which OneCare and a payer—the state Medicaid Agency; the federal government, which manages Medicare; or Blue Cross for commercially insured Vermonters--negotiate a fixed price for a specific block of patients. If the doctors and hospitals providing the care bring the cost in below the target, they can keep some of it; if they go over the target, they have to pay for some of it themselves.
   The importance of the OneCare move lies in the fact that it is the first tangible step toward getting costs to a sustainable level in Vermont. Since 2013, the Green Mountain Care Board has cut the annual inflation rate in the state nearly in half through standard regulation; but even those lower rates are still nowhere near acceptable year over year.
   Both federal Obamacare and the basic health care reform law in Vermont are based on the proposition that successful reform depends on shifting payment to doc tors and hospitals from fee-for-service to capitation. That depends on integrating the currently atomized delivery system so that providers can deliver all the necessary care to blocks of patients for a single price. The vehicle for doing that is called an Accountable Care Organization (ACO).
   There are now two ACOs in Vermont, but one is very small and has no interest in taking risk contracts. OneCare Vermont includes a large majority of the medical assets in the state and is built specifically to take risk. Under federal law, risk contracts could not begin until Jan. 1 of this year. So, OneCare made its initial foray in the limited Medicaid project beginning in February.  The 2018 budget sets out the dimensions of first full year of the program, which will involve risk contracts for Medicaid, Medicare, and commercial insurance.
   The aim is to limit the annual increase in health care spending to 3.5 percent, about half the expected trajectory in the rest of the country. A second major thrust of the OneCare budget is to increase payments to primary care physicians, both within and without the OneCare organization itself. A piece of that assistance is continuance of the Blueprint program, which supports social services that enhance the efficacy of acute medical care, particularly that delivered by primary care doctors.
   Federal support for the Blueprint has been cancelled, but the Green Mountain Care Board negotiated an agreement with CMS (federal Medicare and Medicaid officials) to include nearly $8 million in Blueprint money in the base of the spending on Vermont Medicare recipients. A second component is a multi-faceted program to steer increased financial support to primary care physicians; the latter includes increased payments to doctors who take care of the sickest patients, and to the community support elements participate in that care. More about this below.                 
   The most critical part of the project now is the expansion to Medicare, an agreement that was worked out over the last two years between the Green Mountain Care Board’s then-chairman, Al Gobeille, and CMS. CMS has said that it hopes that Vermont’s development of an alternative payment model (the federal euphemism for moving fee-for-service to capitation, or block financing) can lead the country the promised land of sustainable costs. On its website, CMS had this to say about the project:

   The Vermont All-Payer ACO Model is an exciting advancement in CMS’ partnerships with states to accelerate delivery system reform. CMS has been partnering with Maryland since 2014 as part of the (effort) to shift hospital payments to global budgets that reward value over volume. The Vermont All-Payer Model builds on the Maryland All-Payer model by bringing statewide healthcare transformation beyond the hospital. This Model will provide valuable insight for other opportunities for CMS to participate in state-driven  all-payer payment and care delivery transformation.

   While the feds love the Vermont project, the reform project nonetheless still faces very heavy headwinds at home. The new Governor, Phil Scott, has been indifferent to it. The Legislature, especially the Senate, has been focused on trying to increase reimbursement for independent physicians, which requires sticking with fee-for-service reimbursement and the kind of competition among doctors and hospitals that has driven health care costs in Vermont from roughly six percent of the gross state product in the late 1960s to 20 percent today.
   The most intractable opposition, however, has come from elements of the primary care community. There are about 700 primary care doctors in the state. Of those, about 300 are employed by hospitals. There are about 275 in Federally Qualified Health Centers (FQHCs), which get extra payments from Medicare to support a primary care network; and possibly 30 to 40 in HealthFirst, the organization that represents independent physicians. The FQHCs are joined in an organization called Community Health Accountable Care (CHAC), most of whose units are opposed to risk contracts
   Primary care physicians have a critical role in reform because federal law posits that a person can’t be covered by an ACO unless he or she is referred there by a primary care physician. The effect of the primary care resistance, therefore, has been to limit OneCare’s writ to the northwest quadrant of the state and the southern tier, Bennington, Windham, Windsor counties. Those two sectors comprise a bit over 300,000 people, or about half the state’s population.  Still, it’s very patchy. A major hole is Rutland County, where the local FQHC will not join the reform effort, so the hospital in Rutland, the state’s second biggest, can’t participate.
   The eastern part of the state north of Springfield has no reform presence, nor does a swatch of the north central part of the state served by Copley and Gifford hospitals.
   Moreover, there are portions of the OneCare coverage that are soft. The four hospitals that serve the northwest quadrant—the UVM Medical Center, Northwestern Medical Center in St. Albans, Central Vermont Medical Center in Berlin and Porter Medical Center in Middlebury—appear solid. They are already participating in the Medicaid project.
   Of the three new hospitals that have asked to be included in the 2018 OneCare budget, Southwestern Vermont Medical Center in Bennington appears solid, given its size and the fact that it has its own primary care physicians. However, the two hospitals in the southeastern corner of the state—Brattleboro Memorial and Springfield—are less certain.
   They have said they wish to be considered in the consideration of the 2018 OneCare budget, but their ability to take risk is problematic because both are so dependent on Dartmouth-Hitchcock, the tertiary center that is just a short ride north on I-91. D-H. Although it is a founding owner of OneCare, Dartmouth is unwilling to take financial risk, apparently because of the serious budgetary difficulty it has experienced over the last couple of years.
   Brattleboro and Springfield are both smaller than Bennington, so they send relatively more patients to Dartmouth They could absorb all the financial performance risk for the 18,000 potential enrollees in their sector, but that would be challenging, so they can’t commit until fall.  
   A second soft spot is Burlington, where the Community Health Services of Burlington, an FQHC, is considered close to a decision to come into OneCare, but they haven’t done so yet. If they don’t, roughly 10,000 of the lives they serve would have to be taken out of the proposed 59,000 lives for risk contracts in Burlington and its suburbs.
   If all the soft spots were to withdraw before final decision making in the fall, the total of 137,000 lives contemplated in the OneCare budget would drop to just over 100,000, triple the number covered in the current year, but nonetheless a painful reduction.

Support for Primary Care

   OneCare has built a considerable array of financial supports for primary care doctors to encourage them to join the reform effort; it also plans to support to the kind of community services that aid in moving toward better population health. A first step was to build continued support for the Blueprint into the OneCare budget; that amounts to something over $7 million in 2018. For any FQHC’s that come in, OneCare will pay $3.50 per member for month for the lives they attribute to the ACO. Given that the average panel for a full-time primary doctor ranges from 1000 to 2000 patients, the additional income per year could run to $84,000, with no reduction in the enhanced reimbursement that flows from FQHC status. Independent primary care doctors would get the same benefit for participating.
   In addition, the OneCare budget contemplates an additional $15 to $25 per member per month to doctors caring for the most severely ill patients, up to 10 percent of their practice. OneCare would also contribute to those community social service organizations that enhance the health of the population by mitigating non-medical problems that contribute to illness. Their contribution is a particular concern of the Green Mountain Care Board.
   The fact remains, however, that CHAC remains a strong negative influence on OneCare’s efforts. At least one of its members, the FQHC in Richford that serves Franklin County, supports the OneCare project, but the FQHCs in places like Bennington and Rutland remain hostile. CHAC can be counted on to put all the pressure it can on the big FQHC in Burlington to stay out of the integration movement and stick with fee-for-service medicine, along with any other FQHC that considers joining OneCare.
   As for the Green Mountain Care Board, it will consider the OneCare budget in July. The Board has supported the movement toward integration on the one hand, but it has not put any pressure on CHAC to participate.
   So, OneCare is moving forward, but the headwinds persist. No one knows whether the Governor will take an interest in the reform issue, no one can say what impact the legislature will have on reform going forward, and no one yet can predict whether and how the Green Mountain Care Board will try to resolve the essential question of whether Vermont sticks with the fee-for-service-competition model, or shifts to integrated care with block financing.
   We will know a lot more about that by Thanksgiving.

Vermont State Government Wanders into the Weeds on Health Care Reform

by Hamilton E. Davis

   The Vermont Legislature is ensnarled in a struggle with Governor Phil Scott over how to pay for health care for the state’s school teachers, an end-of-the-session mud wrestling spectacle that is extraordinary even for players inclined to mud wrestling.  The total amount of money said to be involved is $26 million, which may or may not be accurate. In any event, the Legislature is headed into its third unnecessary week, with no agreement in sight.
   It is ironic that while the governor and the legislators were hardening into a stalemate, there were two other health care issues seething under the surface, one of them in the Legislature itself, the other at the other end of State Street in the meeting room of the Green Mountain Care Board. There was magical thinking to spare in all of this activity—nobody on the field was playing well, and some were just terrible.
   If you have to pick the worst performer, not an easy choice, it would have to be Phil Scott. Elected last November, Scott began his tenure by springing on the Legislature a demand that they completely rework how overall school budgets in the state be handled. He gave them, oh, a week to buy into this proposition. Some of the town budgets were on the way to the printer when Scott made his move. Naturally, it died.  
   His latest foray didn’t surface till sometime in late April, far too late to move a major new initiative through a Legislature trying to adjourn by early May. Achieving the goals of the teachers health insurance revamp is both technically and politically complex. Thrashing out those issues in a few weeks was simply not realistic; Scott might prevail on it, but the result is certain to be ugly.
   In my view, Scott’s most critical dereliction is his molasses-pace in filling the openings on the Green Mountain Care Board, the five-member body that now has just three members; one of the missing is a chairman. Scott had to have known by last Thanksgiving that he would ask Al Gobeille, then the Board chair, to run his Agency of Human Services, creating one of the openings. Yet Scott didn’t even submit his names to fill out the nominating commission for Board seats until March…those seats are still open.
   The governor has said he is close to making the appointments, but even then, the new members will take considerable time just to come up to speed on the very difficult choices facing the Board.
   Health care amounts to 20 percent of the whole Vermont economy and the Green Mountain Care Board is the entity charged with getting those costs under control, which includes a tortuously difficult reorganization of the doctor-hospital system in the state. The politest thing you can say about Scott’s performance here is that it is irresponsible. Which is puzzling, because Scott has a chance to take the lead on health care at no real cost to himself. The core reality is this:
   Today, Phil Scott is the only governor in the United States who has a significant piece of his Medicaid budget under control. And the only one who has an excellent opportunity to get his Medicare spending under control. He even has a shot at getting private sector spending close to or at a truly sustainable track.
   The reason for that conclusion is that OneCare Vermont, the main ACO in the state, has in place the infrastructure necessary to shift reimbursement from fee-for-service to capitation. OneCare is one of just a handful of so-called Next Generation ACOs that are authorized by the federal government to move a state’s Medicare (the elderly) population to the new financing model.
   OneCare has already taken responsibility for capping costs for 20 percent of the Medicaid (low income) population; OneCare began sending out the checks for that cohort in February. And OneCare and the state of Vermont have signed an agreement with the feds to extend the program to the Medicare population beginning next Jan. 1, a historic step that could be lost if health care reform doesn’t get competent political leadership from somewhere.
    Instead of building on the last six years of this reform work, Scott is handling health care like a man juggling a live hand grenade.

The Senate Campaign to Derail Reform

   Scott’s not alone in performing badly. There is the Vermont Senate, led by a new President Pro Tem, Sen. Tim Ashe, a Chittenden County Democrat. For the last two years or more, Ashe has run a campaign to focus health care reform on the fortunes of independent doctors. Ashe argues that the indie docs get paid less for a unit of care than doctors in a hospital, especially the UVM networks main facility, the Medical Center Hospital of Vermont. If the Legislature and the Green Mountain Care don’t repair this deficit, Ashe contends, then the system will be badly damaged, and costs will continue to grow unabated.
   A corollary theme is that the fault for the dysfunction in the first place lies with the UVM system. UVM has been “gobbling up” the little guys, buying them out so that the big guy won’t have any competition. And when a patient’s doctor moves from independent status to hospital staff, the patient’s co-payments and deductibles go up.
   All of this sounds perfectly reasonable, as long as you have no idea how health care actually works. Let’s count the ways:

1.     The first problem is that the number of independent doctors in the state is very small. There are somewhere between 1800 and 2,000 doctors in the state. I’ve never seen a credible number for total number of independents, but HealthFirst’s own membership runs to about 140 doctors, divided pretty evenly between primary care doctors and specialists.  The most important thing to know about HealthFirst, however, is that its members represent a tiny percentage of the total acute health  (excluding things like nursing homes and visiting nurses) spending of roughly $2.4 to 2.5 billion. Given that the vast bulk of health care spending is by hospitals, the HealthFirst share is minuscule, low single digits at most. These numbers demonstrate that Ashe’s claim that the independent doctors can force down system costs significantly is simply a fantasy. You can’t solve the problem of health cost inflation that has run out of control for more than 40 years by focusing on two percent of the budget and ignoring the other 98 percent.

2.     The most important problem with the Ashe campaign is that support for independent docs requires fee-for-service reimbursement, whereas the heart of the health care reform effort in Vermont is the shift to block financing, also known as capitation. With capitation, the co-payments and deductibles go away, as does the facilities fees charged by hospitals. In such a system, the whole medical structure is at risk for hitting its financial targets. The federal government has made Vermont the lead state in the country in this effort. And it’s nothing new: it was the core of Act 48, what passed in 2011. I have never heard a word come out of Ashe’s mouth to indicate he understands that, which is why I have labeled him “anti-reform.”

3.     The third problem with the Ashe campaign is that his effort to make the UVM system the villain is wrongheaded. UVM is, by orders of magnitude, the centerpiece of the Vermont delivery system; and its leadership is supplying the most important underpinning for the reform effort in the state. It is not gobbling up the small players; it is taking them in when they apply to come in. As for costs, the UVM system is one of the most cost efficient tertiary centers in the United States. And within Vermont, UVM delivers the cheapest care on a per capita, total cost of care basis. UVM has its problems, they’re just not the ones that Ashe and his compatriots claim. Its main problem is access—in other words, the UVM system is not too big, it’s too small.

      Ashe is the anti-reform leader in the Senate, and he has been single most important anti-reform force in the Legislature—the House has been a pretty passive player there--but that is not the only anti-reform element at work. In fact, it is not the most important player in that regard.
   The single biggest barrier to reform is the non-hospital-based primary care doctor community in the state. Acting on their behalf are two organizations—HealthFirst, which has roughly 70 primary care doctors, along with an equal number of specialists; and CHAC (Community Health Accountable Care) a consortium of FQHCs (Federally Qualified Health Centers) which comprise somewhere between 250 and 300 primary care physicians.
   I’ll begin with HealthFirst, because, although it is small, it is closely allied with the anti-reform elements of the Senate, and because of that tie have become a major player in the closing days of the Legislative session. In fact, the Ashe/HealthFirst campaign crested in the last couple of weeks when Sen. Michael Sirotkin, another Chittenden County Democrat, pushed end-of-the session legislation aimed at showing that UVM was responsible for health cost problems and attempting to crimp any further growth in its network.
    That effort apparently died when the House Health Care Committee finally caught on to the fact that the Sirotkin was using bogus numbers he got from HealthFirst as the basis for the whole effort.
   I will continue with that aspect of the situation in my next post, same time, same location. I will follow that up with an assessment of where CHAC stands today, how well the Green Mountain Care Board is performing; and finally, where OneCare Vermont stands in its effort to deliver capitated care to Vermont. At the conclusion, I’ll have some comments on the role of press coverage in the health care reform saga.

Wall Street Journal Begs to Differ

By Hamilton E. Davis

    One of the most persistent themes in the Vermont political ether is the Republican claim that the state is a bad place to do business. The tax climate is too onerous, so businesses leave; and there aren’t enough jobs for our young graduates, so they also have to leave. The problem, the GOP says, is the Democrat-dominated Legislature, which just spends and spends. They’re irresponsible, the whole lot of ‘em…
   The theme has been out there for years, and our new Republican Governor Phil Scott has made it a centerpiece of his administration. He commonly opens his press conferences by reciting three numbers: six, the number of Vermont employees who leave the state each day; three, the number of kids who drop out of our schools each day; and one, the number of babies born each day to opiate-addicted mothers. The only answer, he says, is rigid budget discipline.
   In the light of this political narrative, it was fascinating to read a report published last week by the Wall Street Journal examining the economies of the three northern New England states.  Maine, New Hampshire and Vermont all have very low levels of unemployment, yet they have significant structural problems with their economies.
   The central problem, however, isn’t the lack of jobs for our young people, the Journal said. The problem is that there aren’t enough people to fill the jobs that are there, or would be if workers were available.
   Low unemployment rates can pose a particular challenge for largely rural states that don’t have dynamic, big-city markets to attract young talent… A dearth of qualified job candidates caused Nate Beatty to move his growing tech company three years ago from Burlington, Vt., to New York City... In Vermont, (he) would struggle to find candidates to interview and also had difficulty luring young people from big cities. ‘There just aren’t enough people,’ he said. ‘It’s just a simple numbers problem.’ ”
   Another example cited in the Journal report: MyWebGrocer in Winooski uses about 150 tech savvy workers in Romania. The company serves a variety of food supply firms. The chief operating officer, Jerry Tarrant, co-founded the company 20 years ago, and the family has long ties to Vermont, but “Vermont is a particularly hard place in an already competitive market for tech workers,” he told the Journal.
   The same dynamic is at work in Maine and New Hampshire, the newspaper said, and the dynamic is not limited to tech workers, although both the Vermont examples happened to be. An example cited from New Hampshire involved a firm that hires large numbers of assembly line workers, typical blue-collar jobs.
  The story quotes the president of the Federal Reserve Bank of Boston as saying that the fragile labor situation in the northern states of the region poses an important threat:  ‘ “I would say that’s a big enough issue, they’re (many businesses) thinking of moving,’ “ he said.
  Okay, that sounds like too tight a labor market is a real threat to Vermont and its two neighboring states. Not a word in the whole piece about tax rates, or government spending proclivities. And it’s not as though the WSJ is some liberal rag.
   So, what should we derive from this article?
  As far as the lure of big city lights, there isn’t much any of the three states can do. Burlington tips the scales at just over 40,000 people; Manchester at about 110,000 and Portland at 66,000. Portland and Burlington are usually considered particularly attractive small cites, but there’s no way they can stack up against places like New York and Boston.
   As for rural areas, you have to like them for their own sakes: lovely scenery, often indifferent schools, patchy communications, cross-country skiing through winter woods. But as for getting enough potential employees there, the Journal and the Federal Reserves economists found, forget about it.
   So, it’s worth asking whether the Scott strategy is off the mark. He does talk about getting more money to education, which might produce more potentially hirable high school graduates, but in fact there is little or no new money or available. And even if there were, it is far from clear whether a little new money in schools would be adequate to deal with as tenacious a problem as the tight labor market.
   What does seem clear is that ascribing the issue itself to the tax policy of Democrats simply won’t wash.
    It also seems clear, however, that something like the Journal article is unlikely to have any serious impact on the quality of political debate in the state. In our brave new world of shattered newspapers, the flight of much of the Republican Party from responsibility, the weak response from Democrats, and the subordination of facts and the truth to partisan mud wrestling, an article like the one I’ve cited, will probably sink without a trace.

Did the Vermont Press Corps Save Robin Lunge's Seat?

by Hamilton E. Davis

   The health reform effort in Vermont has been moving more or less steadily ahead for the last six years, but I sometimes wonder how it survives, given the political follies it has to surmount. The latest case in point—the fiasco surrounding the appointment of Robin Lunge to the Green Mountain Care Board.
   Lunge was appointed to the Board late last year by then-governor Pete Shumlin and has been serving on the supposedly five-member Board since then. When the state Senate prepared to take up her confirmation recently, however, they couldn’t find the necessary paperwork.
  The Scott administration jumped on this glitch immediately; the rules allow for interim appointments, but such appointments vanish if the Senate adjourns in the following session without a confirmation vote. No paper work, no vote. Sorry about that, the Scotties said, but the governor would just have to start the appointment process over again.
  The effect of such a development would mean that Scott would be able to essentially build an entirely new Green Mountain Care Board to oversee a reform that he has shown absolutely no interest in and to which Scott’s staff, if not Scott himself, may be actively hostile to (more about this later). There are already two vacancies on the five-member Board—one of those is the Chair--and Scott can fill those positions any time he gets around to it. The Lunge seat, if vacated, would make that three and control. And board member Con Hogan’s term expires in September. The Hogan seat would make four Scott appointments.
   Nobody contends that Lunge is not extremely well qualified for the Board seat, nor that Shumlin had the right to appoint her, nor that he clearly intended to do so. But rules are the rules, the Scotties said. Sad.
   This construct began to unravel yesterday at Governor Phil Scott’s press conference, convened to tout his accomplishments in his first 100 days in office. The press corps, most of which ignores the substance of health care reform like it was a mutant form of quantum physics, tore into Scott on the Lunge issue. Pete Hirschfeld of Vermont Public Radio, Kyle Midura of WCAX, and Erin Mansfield of Vt. Digger led the inquisition, grilling Scott relentlessly. Didn’t he think she was qualified? Wasn’t it obvious that Shumlin intended to appoint her? What if the Senate just went ahead and voted to confirm her anyway?
   Scott in his aw shucks way just shook it off. “I just think it’s important that we follow the process,” he said. And that seemed to be that. Left to lawyers, there didn’t appear to leave any route to saving Lunge in the seat. That was certainly the position of Scott’s chief of staff Jason Gibbs and his lawyer, Jaye Pershing Johnson.
   The Vermont state house, however, is essentially a political rather than legal place and by afternoon the Scotties dream of mastery over health care reform began to go glimmering.
   Sen. Claire Ayer, chair of Health and Welfare told Terri Hallenbeck of Seven Days that the Senate would vote on the Lunge appointment, paperwork or not. And it then became clear that the frontal assault by an apparently united press corps had borne more fruit than it had appeared at the time.
   A question late in the Scott inquisition was whether Scott would accept a decision by the Senate to confirm Lunge, and he said he would. Voila. Ayer clearly had the support of the Senate leadership, particularly Senate President Pro Tem Tim Ashe and Judiciary chair Dick Sears. So, we can expect the Senate to vote on Lunge and if so, she will be confirmed by a large vote.
   The contretemps over the Lunge appointment seemed to me to illustrate an interesting characteristic of the Scott administration’s political personality. When Scott was slogging through his back-and-forth with the press, he said at one point that he didn’t want the Lunge seat to become a “partisan political” one.
   I, for one, believed him. I don’t think he cares one way or another whether Robin Lunge sits on the Green Mountain Care Board. He’s not a hard-edged political guy at all, which may be why the voters like him so much. But here is what I think is interesting:
   His staff is hard-edged as hell. They care deeply about winning these kinds of political battles. And in the long run, it is the staff that could define the trajectory of the Scott years.
   I am going to write more about the political implications of this. As far as health care reform is concerned, however, Scott still has control of the Board. He can already appoint two of the five members, including the chair. And he’ll get another appointment in September.
   Scott’s real views on health care reform, though, remain obscure, and the Lunge seat follies didn’t change that fact at all.

Did the Vermont Press Corps Save Robin Lunge's Seat?

by Hamilton E. Davis

   The health reform effort in Vermont has been moving more or less steadily ahead for the last six years, but I sometimes wonder how it survives, given the political follies it has to surmount. The latest case in point—the fiasco surrounding the appointment of Robin Lunge to the Green Mountain Care Board.
   Lunge was appointed to the Board late last year by then-governor Pete Shumlin and has been serving on the supposedly five-member Board since then. When the state Senate prepared to take up her confirmation recently, however, they couldn’t find the necessary paperwork.
  The Scott administration jumped on this glitch immediately; the rules allow for interim appointments, but such appointments vanish if the Senate adjourns in the following session without a confirmation vote. No paper work, no vote. Sorry about that, the Scotties said, but the governor would just have to start the appointment process over again.
  The effect of such a development would mean that Scott would be able to essentially build an entirely new Green Mountain Care Board to oversee a reform that he has shown absolutely no interest in and to which Scott’s staff, if not Scott himself, may be actively hostile to (more about this later). There are already two vacancies on the five-member Board—one of those is the Chair--and Scott can fill those positions any time he gets around to it. The Lunge seat, if vacated, would make that three and control. And board member Con Hogan’s term expires in September. The Hogan seat would make four Scott appointments.
   Nobody contends that Lunge is not extremely well qualified for the Board seat, nor that Shumlin had the right to appoint her, nor that he clearly intended to do so. But rules are the rules, the Scotties said. Sad.
   This construct began to unravel yesterday at Governor Phil Scott’s press conference, convened to tout his accomplishments in his first 100 days in office. The press corps, most of which ignores the substance of health care reform like it was a mutant form of quantum physics, tore into Scott on the Lunge issue. Pete Hirschfeld of Vermont Public Radio, Kyle Midura of WCAX, and Erin Mansfield of Vt. Digger led the inquisition, grilling Scott relentlessly. Didn’t he think she was qualified? Wasn’t it obvious that Shumlin intended to appoint her? What if the Senate just went ahead and voted to confirm her anyway?
   Scott in his aw shucks way just shook it off. “I just think it’s important that we follow the process,” he said. And that seemed to be that. Left to lawyers, there didn’t appear to leave any route to saving Lunge in the seat. That was certainly the position of Scott’s chief of staff Jason Gibbs and his lawyer, Jaye Pershing Johnson.
   The Vermont state house, however, is essentially a political rather than legal place and by afternoon the Scotties dream of mastery over health care reform began to go glimmering.
   Sen. Claire Ayer, chair of Health and Welfare told Terri Hallenbeck of Seven Days that the Senate would vote on the Lunge appointment, paperwork or not. And it then became clear that the frontal assault by an apparently united press corps had borne more fruit than it had appeared at the time.
   A question late in the Scott inquisition was whether Scott would accept a decision by the Senate to confirm Lunge, and he said he would. Voila. Ayer clearly had the support of the Senate leadership, particularly Senate President Pro Tem Tim Ashe and Judiciary chair Dick Sears. So, we can expect the Senate to vote on Lunge and if so, she will be confirmed by a large vote.
   The contretemps over the Lunge appointment seemed to me to illustrate an interesting characteristic of the Scott administration’s political personality. When Scott was slogging through his back-and-forth with the press, he said at one point that he didn’t want the Lunge seat to become a “partisan political” one.
   I, for one, believed him. I don’t think he cares one way or another whether Robin Lunge sits on the Green Mountain Care Board. He’s not a hard-edged political guy at all, which may be why the voters like him so much. But here is what I think is interesting:
   His staff is hard-edged as hell. They care deeply about winning these kinds of political battles. And in the long run, it is the staff that could define the trajectory of the Scott years.
   I am going to write more about the political implications of this. As far as health care reform is concerned, however, Scott still has control of the Board. He can already appoint two of the five members, including the chair. And he’ll get another appointment in September.
   Scott’s real views on health care reform, though, remain obscure, and the Lunge seat follies didn’t change that fact at all.

   This just in: The Vermont Senate is to vote on Robin Lunge on Friday

Richard Slusky's Take on Hospital Budgets

Note: The following commentary is by Richard Slusky, the former president of Mt. Ascutney Hospital in Windsor, Vermont, and a recently-retired member of the senior management of the Green Mountain Care Board.

                                                         by Richard Slusky

Hamilton Davis’ Vermont Journal Blog of April 1, 2017 is an important observation that needs careful consideration by the Green Mountain Care Board (GMCB).  The gist of the article is that five of the larger hospitals in the state exceeded their FY 2016 budget caps on Net Patient Revenue by over sixty million dollars.  The caps on individual hospital revenues are approved by the GMCB through an annual budget review process that, in fact, has had reasonably good success in moderating the increases in overall hospital system revenues over the past five years.

Unfortunately, as Ham notes in his journal, not all hospitals have been in compliance with their budgeted caps, particularly in FY 2015, and now in FY 2016.  Last year, the University of Vermont Medical Center was over its revenue cap by @$28million, but reached an agreement with the GMCB to use portions of that excess revenue to reduce future rate increases, and contribute several million dollars to community based programs in Chittenden County.  Other hospitals that had exceeded their budgets also agreed to reduce rate increases in their FY 2016 and 2017 budget filings.

The fact that the 2016 results show that the hospitals are continuing to generate revenues in excess of their budgeted caps is disappointing, but should also serve to remind us that in a fee for service environment, total revenue is a function of price times volume and that even if prices are controlled through rate reductions, volume is still a major factor in the generation of excess revenue.

Ham is probably correct in noting that the hospitals will provide the GMCB with a number of reasons and excuses why they exceeded their revenue targets in FY 2016.  They are very good at doing that, and often very convincing.  (In full disclosure, as a former Vermont hospital CEO for 28 years, I was very good at it also.) Regardless of the reasons and excuses for why this has continued to occur, the reality is that our health care system in Vermont is not sustainable when health care costs continue to increase annually at nearly two times the general inflation rate in the state and the country. 

In order to moderate the growth in health care costs the GMCB has placed revenue caps on hospitals since 2012; ACO Shared Savings programs were implemented in 2013; the State of Vermont entered into an All-Payer Model Agreement with CMS in 2016; and, in 2017, Medicaid entered into an agreement with the state’s largest Accountable Care Organization (OneCare) to pay a fixed amount to provide comprehensive health care services to thirty-three thousand Vermont Medicaid beneficiaries.  The intent of all of these initiatives is to move away from fee-for-service reimbursement, and to establish all-payer growth targets for Vermont health care expenditures that track more closely with anticipated economic growth in the state and nation.

In order for these actions to be successful, several things need to occur:

1.     The GMCB must be willing to enforce the targets that it has established in the hospital budget review process.  What that means is that:

a.      Excess revenues that hospitals generated in one fiscal year should not be incorporated into the hospitals’ base revenues for the next fiscal year;

b.      Rules should be established that clearly define the disposition of the excess revenue in any fiscal year.  Since it is difficult, if not impossible, to return revenue resulting from excess Medicare payments, that revenue might be used to invest in community health programs, more adequately fund primary care services, or fund the costs of transforming the current fragmented system into a more integrated system with value based payments.  In addition, excess revenues from Medicaid and Commercial Payers should be used to reduce future prices.  (It should be recognized that how these funds are distributed is not an exact science, and that some compromises and negotiations between the hospitals and the GMCB will be necessary.)  However, the overriding goals should be to moderate the annual growth of revenue and support the transformation away from a fee for service payment system.

c.     The GMCB should also promulgate and enforce penalties on the hospitals for repeated violations of the revenue caps over and above what is suggested above.

2.     The current plan is that the All-Payer Shared Savings Programs continue to be “upside only” through 2017, meaning that the participating hospitals and other providers bear no financial risk if they exceed the pre-determined expense targets.  These programs would then be transitioned to include some provider risk in 2018, and would ultimately be converted into fixed payment models in 2019 and beyond to meet growth targets of @3.5% per year.  The GMCB needs to develop the oversight and regulatory rules (in accordance with ACT 113) necessary to ensure that this goal is met.

3.     The DVHA (Medicaid) agreement with OneCare is an important first step in moving the state away from fee for service payments and toward fixed payments for comprehensive services provided to defined populations served by the ACO.  This agreement should serve as a model to be extended to commercial payers such as BC/BS and MVP and should be offered voluntarily to self-insured employer plans as well.

4.     The State and CMS must honor their commitments under the ALL-Payer Model Agreement to adequately fund the infrastructure costs needed to transform the payment systems, to meet expanded health information system requirements, and to build an integrated system of health care services in Vermont.  If the state budget cannot support this financial commitment for FY 2018, perhaps some portion of the FY 2016 excess hospital revenue could be used to temporarily fill the gap this year.  Ultimately, however, the state must find a way to meet its obligation to match the Federal dollars that have been committed under the All-Payer Model Agreement.

Transforming Vermont’s health care payment and delivery system to become more efficient and more affordable for Vermonters is no easy task, but that has been the intent of Vermont’s Legislature and its administrative leadership since ACT 48 was passed in 2011, and for many years before that.   In the past five years, much has been accomplished, and with the recent All-Payer Model Agreement and the Medicaid Agreement with OneCare, the formal structures for achieving the state’s goals are now in place.

In order to be successful from here on, everyone must do their part to fulfill their obligations.  The hospitals and other health care and community based providers must honor their commitments to the ACO, and the ACO must honor its commitments to its providers.  The hospitals must rein in their revenues and expenses and meet their annual budget targets.  The state legislature and administration must meet its financial obligations to reasonably fund the cost of this transformation. And the GMCB will need to exercise the necessary regulatory authority to ensure that the parties that they oversee and regulate meet their obligations.

We have the opportunity in Vermont to prove to the nation that health care costs can be contained, and that our health care system can be transformed to be more integrated and to become at least as much focused-on prevention and health as it is on treatment of disease.   Achievement of that goal will require collaboration, commitment, and sacrifice from us all.