by Hamilton E. Davis
The trajectory of cost increases in the American healthcare system began to assume its modern shape in the early 1970s, shortly after the advent of government payments for care for the poor and the elderly—Medicaid and Medicare. The trajectory increased dramatically in response to the new demand. The percentage of Gross Domestic Product spent on health care rose from 6.6 percent in the mid-1960s to nearly 20 percent today.
There was one significant break in the 58-year spending track. It began in 1994 when the upward slope of the curve went nearly flat for three years. In 1997, however, it resumed its pre-1994 inflation rate.
The three years of cost relief coincided with what I’ll call the Managed Care era. Managed Care companies, called Heath Maintain Organizations (HMOs) were specialized insurance firms that proposed to save the public money by putting doctors under pressure to reduce costs. The way they went about it involved a clever bit of arbitrage: The managed care companies drove doctors’ revenue demands down, but took payers’ costs down by less—and kept the difference. Which was good for payers, the public, and the insurance companies.
The medical community, however, lost its collective mind. Medical providers were in a rage. Doctors began to tell their patients that they weren’t being allowed to give them the care they needed. “Sorry, the HMO says no.” Think about the effect that would have on a mom with a sick child. All over the country, a meme arose that HMOs were evil, and a wave of opposition began to form and sweep across American society. It even reached the movie industry. If a film character mentioned the word HMO, hissing and booing sounded across the theater.
Healthcare cost inflation was in a sustainable range, about the ambient inflation rate, but in three years the HMO movement in its initial form collapsed like a wet dishrag. HMOs evolved into ordinary insurance companies, passing along the costs generated by medical providers. By 1997, cost increases were running at eight to 11 percent per year. In Vermont, hospital costs between 2000 and 2009 doubled.
I’ve resurrected this history because in an ironic way it is newly relevant today. The essential point is the potential power of alienated medical providers. Which is what we have in Vermont today. The entire hospital industry is disgusted with, and angry at the regulator, the Green Mountain Care Board.
The 60 percent represented by the UVM Health Network has had its revenues constrained to the point that its mission is at risk, despite the fact that its cost performance and quality ratings are among the best in the United States. The other 40 percent, the small community hospitals have business models that are at best marginally sustainable, and are petrified that the Board might push them over the edge. Those issues have been the subject of earlier articles in this series.
The issue for today is why the UVM Health Network has failed over the last eight years to mount a coherent defense of its performance. The attack on that performance by a whole range of players has been savage and unjustified, as I have attempted to show. But the UVM Network has far more resources in every sector—quality control, financial management, policy expertise, range of services from primary care to specialty treatment—than any other provider in Vermont. It has, importantly, a multi-million dollar political and public relations apparatus. Plus, it is the single most important asset in the state’s economy.
Yet, over the last eight years, it has failed to tell its own story effectively. A toxic narrative has taken a firm hold on the political environment. In my previous articles, I’ve laid out the evidence for that. The question for the Network’s senior management now is whether that narrative can be reversed. Failure to do that will cost Vermont one of its most important assets, national-class medicine in the center of its population, Chittenden County. Consider:
Who is in charge and who’s doing what? The UVM Network has a new CEO; he is Dr. Sunil Eappen, an impressively credentialed executive from MassGen Brigham, a huge hospital in Boston. Sunny, as he is called, took the helm in December, and he is just now getting acquainted with his own system, and with the broader healthcare community in Vermont. Sunny inherited the in-place senior management team and we need to assess its performance, both because of its relevance going forward and because Sunny will have to cope with the toxic anti-UVM Network narrative that has been in place for years, and has actually gotten worse lately.
For example, Eappen met personally recently with Owen Foster, the new chair of the Green Mountain Care Board, and the few reports that have seeped out about the discussion indicated it was a rough ride. You could gain some insight into what rough means by watching the recent Board hearing on OneCare Vermont, which is essentially an arm of the UVM Network.
Foster trashed OneCare, a performance I detailed in an earlier article in this series. Most of that assault was entirely unwarranted, but it was pretty obvious that at least a portion of its roots lay in the last days of the retiring CEO Dr. John Brumsted’s tenure. Over the last couple of years, Brumsted had pressed the case to Governor Scott that UVM’s Medical Center Hospital was being starved of revenue by the Board, and if that process wasn’t reversed, the Network might have to cut some essential services to Vermonters.
Scott obviously believed that because he tore into the Board for its bad performance last June, a process I looked at in yesterday’s article. What happened next was a classic managerial mess. When the issue of cutting services came up last fall, Al Gobeille, Brumsted’s Chief Operating Officer, said publicly that the Network would never cut services, contradicting Brumsted’s two-year
What was even worse, some observers believed the back-and-forth showed that the Network high command was lying about the issue. Colin Flanders, a reporter for Seven Days newspaper, said that explicitly on Stewart Ledbetter’s Channel Five news show. “Gamesmanship,” he called it.
A second factor in the Brumsted-Gobeille-Scott kerfuffle is the role that was played, or not played by Anya Rader Wallack, who was named a Senior Vice President for Strategic Communications in the spring of 2021. The anti-UVM narrative was firmly in place when Wallack took office, but it’s fair to ask how she let the Gobeille caper cause such damage…
In any case, Eappen needs to get that whole function under control, yesterday.
It is extraordinary that the UVM Network hasn’t even really tried to use its huge contribution to health care to get treated at least decently. Let’s count the ways. OneCare has contributed more than $100 million to support primary care in the state. Sixty percent of that comes from the Network. Take it way, and the already shaky primary care doctor network in Vermont will crumble. And the Network would be fully justified doing that; in fact it was close to doing before Eappen arrived.
The same sixty percent keeps the Vermont hospital association afloat. Yet the Network played no role in the recent decision to hire Mike Del Trecco to replace Jeff Tieman as President of the trade group. Del Trecco has been following Tieman’s policy of throwing the industry’s weight behind keeping all 14 full-service hospitals afloat in a state that only needs four. A couple of years ago, Deven Green, a lawyer for the association, said publicly that the local Vermont hospital network was “lean and mean.” Really. The consultants who studied the system told the Green Mountain Care Board in 2021 that Vermont has at least 150 beds more than it needs. That might be mean, but it is a long way from lean.
Vermont has an enormous investment—hundreds of millions of dollars—in what reformers call an All-Payer Model. Think of that as a critical step on the way to full capitation, which is the federal government’s preferred path to real cost containment. The centerpiece of the effort in Vermont is the UVM Health Network. No Network, no health care reform. The Network could refuse to participate unless it gets treated fairly by the Green Mountain Care Board.
The Network has got nothing but grief for its leading role in reform. A politically competent management should be able to utilize its numerous strengths to negotiate far better treatment than it has received since 2018. That’s the real challenge facing Sunny Eappen and his senior management and they need to figure it out, well, now.