by Hamilton E. Davis
In March of this year, the Covid-19 pandemic dropped a viral curtain over modern life as we have known it. The arrival of the beast coincided with the cresting of President Donald Trump’s campaign to trash American politics, cripple our national government and subvert our notions of honesty, decency and intellectual integrity. There have been myriad effects from these evil winds, but one of the most important has been the loss of focus on the reform of our health care system. That loss affects the whole country, but it has fallen with particular force on Vermont because Vermont has been in the forefront of the reform effort.
That is unfortunate because the state is on the cusp of what I believe is the single most important policy decision it has ever made—what to do about its hospital system, and more precisely, the system’s small community hospitals. We are a state of just over 600,000 people and we have 14 ½ hospitals delivering care to them at annual cost of more than $2.7 billion. That is billion in case you skipped over it. The half a hospital is Dartmouth-Hitchcock Medical Center (DH) in nearby New Hampshire, which delivers tertiary care to the whole eastern part of the state. Forty percent of its patients are Vermonters.
The problem is that the regional community hospital system was built for the Vermont of 100 years ago, and it is both medically and financially unsustainable: we just don’t have the money to pay for it. Most of the community hospitals are simply too small to provide 21st century medicine at a full hospital level. Their finances are shaky at best and they are trying to finance the things they should do by doing things that are too complex for them…
The obvious question is what to do about it, a question that the whole state policy apparatus has been wrestling with one way or another since 1983, and directly since 2012. I believe the reformers need to come up with their answer by mid-September. And in my view there is only one sustainable path forward. Here it is, call it a…
Manifesto
Vermont needs five fully elaborated hospitals—in Burlington, Lebanon, N.H., Rutland, Central Vermont, and Bennington. Smaller hospitals now operating in St. Albans, Newport, St. Johnsbury, Windsor, Springfield, Randolph, Middlebury, and Morrisville should be stepped down to some level of clinic, whose basis would be strong primary care, a strong emergency room, a few inpatient beds for patients transitioning from hospitals to home, and possibly maternity services, depending on travel times in their regions. The smallest hospital, Grace Cottage in Townshend, shouldn’t be a hospital at all, a fact known to everyone except the people of Townshend. A right-sized hospital system could save Vermonters hundreds of millions of dollars a year, and its quality would be better. Failure to do so will leave us with an unsustainable medical and financial mess.
If the solution is that obvious, why don’t we just do it? Glad you asked. Because it’s complicated? Nope, it’s actually hideously complicated. But it’s also essential to the physical and financial health of the entire state, so Vermonters need to step up. I suspect that some of my tiny corps of brilliant readers will help lead the way, whether they agree with me or not.
The Vermont reform effort was launched in 2012, and has achieved a significant level of success over its eight-year tenure. By using its regulatory power, the Green Mountain Care Board has cut the annual inflation rate in the state’s hospital system in half, saving Vermonters half a billion dollars in the process; and, working together, the state’s hospitals and doctors and the Scott administration have built the infrastructure needed to shift the flow of money through the system from fee-for-service to fixed price contracts. Fixed price contracts are the only reliable route to a high quality, cost efficient and hence sustainable health care delivery system for the 21st century.
However, every step along that path has been difficult, often tortuous. The initial machinery to control costs in Vermont hospitals was put in place in 1983, and that machinery, strengthened along the way, accomplished nothing much over 30 years; we didn’t get serious until 2013. And shifting to fixed price contracts is incomparably more difficult. Our first execution of that final step took place in 2017, and there has been too-slow, but nonetheless steady progress since.
The process, however, requires tearing up not just the financing in the health care delivery system, but the culture of medicine itself. Every single doctor and every single hospital has grown up in a medical environment where the more stuff you do, the more money you make. Moreover, the implications of the reform effort reach beyond medicine to the social and political structure of the state. The Vermont project makes perfect financial and medical sense, but it would have very severe social and political consequences. The local hospital is often the biggest employer in town, and the medical and management bigfeet take home huge paychecks by Vermont standards. CEOs get paid $400 to $600,000 a year; an $800,000-a- year surgeon could support a whole town’s Little League program out of petty cash. Vermonters should know, however, that if they continue propping up their failing rural hospitals with the current financing scheme they will be opting for care that is wildly overpriced and of questionable quality.
That issue has been seething under the surface since the onset of reform, but it is rising to the top this summer. The vehicle carrying it there will be the Green Mountain Care Board’s annual hearings on the hospital budgets for Fiscal Year 2021, which begins Oct. 1. Within that framework, the central question will be whether to require the hospitals to prepare and defend “sustainability” plans. What that means on the ground is that they will have to show that their high revenue service lines garner enough patients per year to ensure that those medical teams do enough cases to meet at least the threshold quality requirements; and that their unit costs make sense. The Green Mountain Care Board wrote that requirement into the budget orders for six of the hospitals last September, and they are considering whether to extend it this year to all hospitals.
Despite the glaring need to right-size the system, the Vermont hospital association has gone into full-throated opposition mode. In a letter to the Board on March 11 of this year and in testimony on July 15, Jeff Tieman, the president of the association, said that the sustainability effort was a terrible idea. It isn’t needed, he said, it can’t be done, and, in any event represented “regulatory overreach” by the Board. The letter was signed by all the hospital CEOs in the state, including Dr. John Brumsted, the CEO of the UVM health network, and Dr. Steve Leffler, the President of the UVM Medical Center, Vermont’s academic medical center, which delivers half the care in the state. The UVM network also includes Porter Medical Center in Middlebury and Central Vermont Medical Center in Berlin—adding those to the Burlington center runs the UVM dominated portion of Vermont care close to 60 percent.
Tieman said that the sustainability initiative was doubly unfortunate in the light of the damage that the Covid virus had inflicted on hospital budgets. The reality though is that the sustainability initiative was discussed at length last summer, months before the virus appeared, and the small hospitals were just as hostile to the idea then as they are now. They saw it then, as they see it now, as financial suicide: if they are forced to deliver only care that is very low risk medically and makes financial sense, they won’t be able to stay in business. Of course, many of them are having trouble staying in business, offering every lucrative service line that can draw even a trickle of patients.
Still, the Tieman broadside appeared to have a strong effect. At its July 15 meeting, the GMCB could have voted to affirm the detailed format for the sustainability push, but Board Chair Kevin Mullin pulled if off the agenda quickly. The Board can’t afford to delay the issue any more though, and they will have to face it at their meeting on Wednesday.
Even if they vote to go ahead, which I suspect they will, the real test will come in the way the Board steers the individual hospital budgets. And in a very real sense, it isn’t up to just the Board. The whole policy apparatus, including the public at large, will have a voice in the ultimate outcome; and they should make their voices heard. That is how the best public policy gets made.
It will not escape the notice of my tiny corps that I have made a big bunch of assertions here, but I haven’t actually proved a damn thing. I know, I know. But, hey, it’s a manifesto after all. In any event, there is plenty of evidence available, and I will lay it out to the best of my ability over the next month and a half. A Vermont Journal will follow the process as closely as possible; and while the above has been a panoramic view, I’ll shift now to a very tight focus. The issues will get a vetting in every hospital budget decision. The same analysis needs to be made of the performance of all the major players—the Scott administration, the Legislature, the UVM network, OneCare Vermont, the hospital association, Vermont Blue Cross, the state auditor, the Health Care Advocate, the business community, the federal government’s Medicare apparatus, and the press.
Finally, in a departure for A Vermont Journal, I’ll publish any comments from my tiny corps of brilliant readers that I think make a contribution to the debate. My own views on these matters will be evident, but I am confident that my tiny corps will weigh the evidence carefully and come to their own conclusions.
So, as always, Caveat Lector.