by Hamilton E. Davis
One of the marginal but still important players in Vermont’s health care reform project is the Health Care Advocate. The Advocate is an arm of Vermont Legal Aid, a stand-alone non-profit law firm, but it is funded by the Legislature and has permanent status as a party to the regulatory functions of the Green Mountain Care Board.
The current Chief Advocate is Mike Fisher, a former legislator who played a key role in the early days of reform. A social worker, Fisher served seven terms in the Vermont House, representing the eastern Addison County towns of Bristol, Lincoln, Monkton and Starksboro. In his last three terms, he served as Chair of the House Health Care Committee. He lost his seat in the 2014 election; he was named Advocate in 2016.
In his first two years as Advocate, Fisher pressed hard on the issue of the affordability of health care, especially for purchasers of insurance on the federally subsidized Exchange. For example, in the 2017 GMCB hearings on the rates that Vermont Blue Cross and the New York-based carrier MVP could charge its Exchange customers, Fisher hired an actuary to challenge the findings of both the Blues actuary and the actuary for the Board itself. It was pretty clear, however, that Fisher’s guy simply couldn’t compete with the other two experts, and the Board basically ignored him in the decision-making process.
It wasn’t that Fisher’s views on affordability were invalid, it was that they didn’t contribute much of anything new. Everyone who has been paying attention over the last, oh, 30 years, knows that health care isn’t affordable. That is precisely why the federal Exchange, and the Green Mountain Care Board itself, and indeed the whole health care reform project exist in the first place. The relevant problem is what to do about it…
In recent months, however, Fisher’s tone has become increasingly strident. In September, for example, Fisher took the occasion of a medical issue in the Vermont prisons to suggest that the Vermont Department of Corrections had mis-allocated or lost $2.2 million of the payments to the contractor that delivers care to inmates. The medical issue was substantive, but there wasn’t any credible evidence to support the claim. The Advocate’s tone, however, was clearly prosecutorial…
If there was any doubt about that conclusion, it vanished early last month.
On Nov. 9, the Fisher urged the Green Mountain Care Board to reject OneCare Vermont’s 2019 budget on the grounds that the state’s Accountable Care Organization (ACO) “has not provided the Board with adequate information to exercise meaningful oversight.” Specifically, Fisher said OneCare still does not have final figures for its contract with Vermont Blue Cross for care delivered in 2018, or for 2019.
The Advocate’s letter also questioned OneCare’s ability to manage the quality of care delivered under its contracts, the way patients are managed, the transparency of OneCare’s operations, along with a series of lesser errors of omission and commission. The letter also charged that OneCare was deliberately misleading the Board; and it implied that the problems of the Vermont delivery system can be laid at the feet of the University of Vermont’s health network.
The question of budget approval is a critical one for OneCare and the issue of reform generally. The Board has scheduled a vote on the budget for Dec. 12, with a fall back date of Dec. 17. The decision is difficult because significant pieces of budget picture will not be available by then. That is not a failure on the part of OneCare. It is the result of a way-too-tight regulatory schedule: the state’s hospital budgets were not completed until Oct. 1, but OneCare’s budget, most of which goes to hospitals, goes into effect Jan. 1, 2019. The single most important element in the budget – the money that will be available to pay for Medicare recipients – has not come in from federal Medicare officials yet; last year, the numbers didn’t arrive until two days after Christmas.
Unless the Board loses its collective mind, it will reject the recommendation by the Advocate because that could threaten the reform project itself. Without budget approval, OneCare might not be able to disperse the prospective payments to hospitals that are the vehicle for the shift to a new financing mechanism. What the Board is likely to do is approve the budget on some sort of contingent basis, and then issue a final decision once all the numbers are available.
The Board is under no legal obligation to comply with the Advocate’s recommendations; but the content and tone of Fisher’s letter could have political ramifications down the road. That fact makes it important to look closely at the Advocate’s performance. The place to start is the following paragraph from Fisher’s five-page letter:
The University of Vermont Medical Center and UVM health network control an increasing proportion of the state’s providers as well as OneCare, the state’s only ACO. The Board must ensure it is regulating the health care system to prevent this monopoly from further exacerbating Vermonters’ affordability challenges and undercutting the success of the all-payer model…Our health care system must not privilege provider profits over cost containment and consumer affordability.
This paragraph alone indicts Fisher and the Advocate’s office for being intellectually dishonest, and politically irresponsible. Too strong? Let’s look at the evidence:
The central problem is the claim that the UVM health network is responsible for “further exacerbating” the cost problems in the system, and that it is “undercutting” the all payer model, the buzzword for the shift in the reimbursement of hospitals and doctors from fee-for-service to block financing at fixed prices. That claim is simply outrageous: it is not just wrong, it flies directly in the face of all the data that exists, as well as the history of the reform effort.
Beginning in the late 1960s, spending by all Vermont hospitals exploded, rising at eight percent or more year over year. In the decade 2000 to 2009, Vermont hospitals doubled their budgets, a performance that inspired the health care reform effort that began in 2011 with the Legislative passage of the basic reform law.
By 2013, however, the Green Mountain Care Board was in charge and the whole cost environment began to change. The cost increase in the 13-hospital Vermont system from 2014 to 2015 was 5.0 percent, from 2015 to 2016 was 4.4 percent, and from 2016 to 2017 was 2.8 percent. The 2017 figures were the last actual numbers we have, but both the 2018 and 2019 budgets came in under 3.0 percent. During UVM’s budget hearing earlier this year, the Vermont Association of Hospitals and Health Systems submitted an analysis showing that the shift from the high 2000-2009 inflation track to the much lower 2013-2018 track saved Vermonters some $600 million.
How did that happen? The Green Mountain Care sets the cap of about 3.5 percent on the system, but the Board itself can only push for a given result. The actual work of getting the whole system cost down was carried out by the finance team at the UVM health network. Evidence? If you take the recent numbers and strip out the UVM figures, the system cost goes up by about 25 percent (from around three to four percent). Not convinced?
Take a look at the actual figures for the 2017 fiscal year. In that year, UVM’s Medical Center run over its budget by about $40 million, driven by an unusual influx of new patients. At the same time, some of the small community hospitals lost a large number of patients, although their budgets did not actually drop. The system result: the total cost increase dropped from 4.4 percent to 2.8.
If UVM represents about half the system, and its budget blows through the cap, how can the system cost go down? It’s simple, actually. UVM’s costs per capita are far below that of the community hospitals, mainly because UVM’s docs get paid salaries and therefore have no financial incentive to do more than less. The actual increase in UVM’s 2019 budget over 2018 was just over one percent, far below the 3.5 cap and also far below national inflation, which was running at three percent in the middle of this year.
The fact that UVM’s cost per capita in its primary service area—basically Chittenden County--has been very low in Vermont since the early 1970s. It has also been true, by the way, in many other states. In Wisconsin, for example, costs per capita in the area surrounding the state’s academic medical center in Madison are far below the big tertiaries in Milwaukee; same between the academic center in Iowa City, compared to similar hospitals in Des Moines. The same result shows up in Maine, Washington, Massachusetts, and with particular effect when comparing costs in Boston and New Haven, where New Haven has one world-class facility at Yale, where Boston has several. Per capita volumes in New Haven are half the level of Boston….
These numbers lie buried in data bases that are accessed by health policy analysts, and it is not surprising that the average person doesn’t know anything about them. But the Advocate is not the average person. Fisher gets paid to understand them, and there is no evidence that he does so. And it’s not just Fisher himself. He has a professional staff of three or four, including lawyers and at least one credentialed policy analyst.
To me, the final sentence in the paragraph is the one that indicts the Advocate team as intellectually dishonest. That’s the one that says the Board must not “privilege profits” over cost containment and affordability. That is pure dog whistle material.
The fact is that there are no “profits” in the Vermont hospital system. All of our hospitals are non-profits. The hospitals do have margins of revenues over expenses that they retain on their balance sheets. It is often harmless to refer to these “margins” and “bottom lines” as profits. But it is not harmless in this case because margins are very different from profits in a private system.
In much of the economy, the profits for a company are the money that the owners of the business can take home and spend on whatever they want—cars, boats, ice cream, trips to Vegas. In a non-profit system, the margin money has to stay inside the entity itself. It can only be spent on stuff for the hospital, not the people that work there.
The most important single reason for maintaining a two to four percent margin or bottom line is the need for medical systems to borrow money in the national financial markets to pay for new infrastructure. If a medical company wants to issue bonds to pay for a new patient wing, for example, their bonds will be assessed by ratings agencies, and those ratings will depend heavily on whether your margin is considered healthy. UVM, for example, has been building a new, $180 million patient wing. The total cost of that over 30 years will approach half a billion dollars. Last year, UVM won a bond upgrade by the rating agencies, and it saved UVM, and thus Vermonters, tens of millions of dollars.
That does not mean that hospital big feet—senior administrators and specialist docs—can’t give themselves more money. They can and do. But profits have nothing to do with it. The salary increases just become expenses on the hospital’s books. That way, they can take the money home. If you want to see that process at work, look at the doubling of hospital budgets in the first decade of the millennium: given that 60 percent of hospital budgets are labor, the big feet took home some serious raises in that era.
Those days of wine and roses are over in Vermont hospitals. There are still very high salaries in the system, but they are constrained now by the steady pressure from the Green Mountain Care Board and the continuing commitment to cost containment by the UVM health network. The 2019 budget approved UVM’s Medical Center increase by a parsimonious 1.1 percent over 2018.
The reason for belaboring this point is that making OneCare Vermont appear a blundering spendthrift is that it could feeds the anti-reform sentiment still alive in the reform environment, particularly the Legislature. It is also true that the Advocate’s broadside could be used as a club to beat on the Green Mountain Care Board itself. During the recent political campaign, for example, Gov. Phil Scott mentioned that he might consider trying to cut the Board from five members to three. And in an earlier kerfuffle between the Advocate and the Board, former Gov. Howard Dean tweeted that the Board had never accomplished anything worthwhile.
In its letter, the Advocate listed several other shortcomings that it found in OneCare’s operations in such areas as transparency, quality control, and case management. All these issues are complex, and in general the Advocate’s factual positions are often valid, but its expectations for high performance at this early stage of the game are simply unrealistic. It’s like complaining about heat loss in a new house that doesn’t have a roof yet.
The argument set forth above is a quick overview of a reform issue that must be addressed in the next two weeks. There are a number of other issues that stand in the way of achieving a final form for the whole Vermont project. I have suggested that the last pieces of the puzzle need to be put in place by early spring of 2019. I will post analyses of all of these in the coming winter.
The important question right now is whether the Board approves the OneCare budget in some fashion or whether it accedes to pressure from the Advocate, and threatens the reform movement itself. We’ll know the answer to that question in the next two weeks.