Health Reform: More Why and a Start on How

by Hamilton E. Davis

   Okay, let’s go out on a limb here and assume that whoever reads this stuff accepts the proposition that we can’t get the cost of health care under control without shifting the way we pay for it. My sense is that the people who do accept it are in a minority, but it is also clear to me that they are the only ones that understand the problem. There is an ocean of carping about the reform enterprise, but there simply is no credible alternative path to sustainability.
   In a recent gathering of state health care officials in Washington, Mike Leavitt, a conservative Republican former governor of Utah, argued that fee for service reimbursement for health care is the “greatest single threat to the economic vitality of the United States.”
  There is a very powerful consensus among both Democrats and Republicans, Leavitt said, that moving health care financing to capitation is the only viable path to a sustainable future. A corollary principle is that coordinated care is better than uncoordinated care.
  He added that evidence for the bipartisan consensus on this issue was the 2015 passage of a federal law known as “MACRA” with full support of both parties in Congress. MACRA aims at forcing a shift away from fee-for-service to block financing and that kind of bipartisan agreement is almost unheard of in the toxic Washington environment.
   It is worth noting that the points made by Leavitt are foundation stones of Vermont’s reform effort as set forth in Act 48, the reform bill passed in 2011.   
   So, how might we go about it?
   The first step is to understand that the enterprise of modern medicine is radically different from that which prevailed 30, 40, 50 years ago. American medicine grew up as a cottage industry. A doctor gets training, hangs out a shingle and begins treating patients. Another doctor does the same thing, but there is no necessary connection between them. Hospitals are just boxes occupied by aggregations of doctors. There is no real connection between the boxes and even between the doctors within the boxes.
   Consider a patient at the Medical Center Hospital of Vermont, circa 1990—not that long ago. The patient has cancer of the spine, and he is undergoing surgery to save his life. As he lies there, he is attended by a neurosurgeon, an orthopaedic surgeon, a cancer specialist, an anesthesiologist, a radiologist (imaging), a pathologist, hospital employees such as nurses and technicians, and possibly others. Whatever it takes.
   Here’s the beauty part. Each one of those professional services was delivered by a separate company, with its own financial structures and fee schedules—five, six, seven separate companies. If we built cars like that, every car would cost half a million dollars, and a huge number of them would be falling apart before they got off the dealer’s lot.
   Modern medicine is orders of magnitude more complex than medicine was 30 or 40 years ago. It is also now hideously expensive. So, it is critical to understand that the delivery of medical care has to be integrated: doctors have to work together in coherent systems. Patients have to move smoothly and efficiently up and down the complexity ladder. They have to start with primary care, then move to community hospital and specialist care, then to tertiary centers for the most complex medical problems.
   An example for the need for this can be found in a piece I wrote for awhile back on Vermont Senator Dick McCormack’s arm.
   There has been some important integration.  The University of Vermont units merged in 1995; the Medical Center Hospital of Vermont joined with 11 physician practice groups to form Fletcher Allen Health Care. But taking the state as a whole, there is still nowhere near enough integration yet to make the system viable for cost performance or quality performance.


   The first problem is how to organize the system so that cooperation among elements of the delivery system is possible. The template for that is contained in the federal Affordable Care Act (ACA) Obamacare. The key element of Obamacare as it applies to the Vermont reform effort is the provision for something called an Accountable Care Organization (ACO).
   (I understand that President-elect Trump has pledged to repeal Obamacare, but that is an issue for the future.)
   Commercial companies in a genuine market succeed or fail depending on how well they deliver products or services that people need and want at a price they can afford. They are like any biological organisms that must adapt to their environments. Health care companies that operate independently of one another have proven, over the last 50 years, that they can’t do that.
   The most significant barrier to getting to a single price for the product—medical care for blocks of patients at the primary, community hospital and tertiary level—is the federal prohibitions against price fixing by competitors. If a person who lives in Rutland needs health care, he can get it from his primary care provider, or from Rutland Hospital, or from the UVM system or from Dartmouth-Hitchcock. What is the most cost and quality efficient way to do that?
   Obamacare permits the primary care doctor in Rutland, Rutland Hospital and UVM or Dartmouth to coordinate this process totally. It bypasses federal anti-trust law. If the primary care doctor and Rutland Hospital and UVM join an ACO, they can get this job done just as efficiently, or almost as efficiently, as Toyota can deal with a problem with the machining of its camshafts.
   That’s what an ACO can do. We now have a fully operative ACO in Vermont. The ACO is called the Vermont Care Organization (VCO). Sorry, but there is no surcease from an alphabet soup world. The VCO subsumes more than 90 percent of all the medical delivery resources in the state.  
   And it has all the resources and legal authority it needs to succeed. Which doesn’t guarantee that it will succeed. The people that run the Medicare and Medicaid programs in the United States believe that the Vermont program is the single best vehicle to get modern health care on a sustainable cost and quality track. But it has to get done in Vermont and that will be a very difficult thing.
   I will look at the All Payer Model, the next big problem, in the next episode.