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.