by Hamilton E. Davis
In late July, I put up a post assessing the state of health care reform in Vermont. It was quite bleak without being hopeless. There was zero leadership from Gov. Phil Scott and his avatar, Jason Gibbs, and Scott’s Green Mountain Care Board was just getting everything wrong. The members refused even to look at what really needs to be done: shifting our data systems to a per capita basis rather than fee-for-service, which incentivizes overutilization and bad quality; and restructuring a wildly out-of-whack hospital system that features 14 hospitals when we need at most four, which is wasting $500 million or more a year.
Their worst blunder was focusing all their regulatory firepower on draining every nickel they could out of the University of Vermont’s three-hospital Health Network that delivers 60 percent of all the acute care in the state and is—by a huge margin—the highest quality and most cost-efficient element in the system. There is a wealth of consulting data sleeping in the Green Mountain Care Board’s archives that support those assertions.
Still, there were couple breaks in the clouds. One was the fact that in 2019, Jessica Holmes, the intellectual leader of the Board, had persuaded the other members to adopt what she called a Sustainability effort that would give shape to the necessary restructuring. The central idea was to assess each major service line in the individual hospitals to ensure that each had enough cases each year to satisfy a quality standard and a unit cost that made sense. High quality and reasonable unit costs are the touchstones of any viable system in the 21st century.
A second glimmer of light, I thought, was the prospect that Owen Foster, who had assumed the chairmanship of the Board two years, earlier might actually start to get it. He seemed smart enough and in answer to some questions in the Board’s public comment time, he assured the public that he understood the value of the consulting data, and that he would include it in Board deliberations—he wasn’t afraid of it.
That was then.
The August hearings on $4 billion of spending by 14 Vermont in the hospital fiscal year 2025, which starts Oct. 1, were the usual miasma of a zillion numbers and analysis by the GMCB staff, mediated by random questioning by the Board members. The real deal, however, went down on the few days before the legal deadline for the Board’s decisions, which was Friday, Sept. 13.
And the Board lost its collective mind. Egregious overspending hospitals got what they asked for. Not a syllable of the data in the archives was mentioned. Four independent hospital CEOs said the cuts to their proposed budgets meant their hospital couldn’t deliver the care the people of their community need. The Board did another hatchet job on Copley Hospital in Morrisville, the highest performing facility among the non-UVM indies.
By far the most significant decision, however, was to force UVM’s Medical Center Hospital in Burlington to spend less in FY 2025 than in 2024, a decision that would convert the Medical Center to an ordinary a community hospital, serving just Chittenden County. It is impossible to overstate how dumb an idea that is. Vermont is the financially weakest state in the union, and the UVM Network is one of its most important assets, medically and economically, and the Board showed it is dead set on destroying it.
In the face of that threat, the senior management of the UVM Network finally firmed up and pushed back. The response came in the form of a blistering letter from Eric Miller, the Network’s Chief Counsel, attacking the Board’s performance in legal terms. Almost immediately, however, Dr. Steve Leffler, the top boss at the UVM Medical Center Hospital and the primary spokesperson for the Network, wrote a letter to the Network staff walking back the Miller letter, conceding that, depending on the actual wording of the final order, the Network could have to “reduce services.”
That striking juxtaposition—Miller going hard in one direction, and Leffler backpedaling in the other—raised an equally troubling question—is Sunny Eappen, the CEO of the whole Network, really in control of his own ship?
From an aerial view, the above survey resembles the smoking ruins of a war zone. Every major player is playing badly, and doing serious damage to the health of all Vermonters, as well as the 162,000 residents of northeastern New York served by the Network. I mean to include in that indictment the Scott Administration, the Green Mountain Care Board, the Vermont Legislature, the Vermont hospitals’ trade group, and the senior management of the UVM Health Network.
The marginal groups like the Vermont Auditor and the Vermont Health Advocate are similarly clueless. And while some of the Anvil Chorus of commentary on health care reform is well intentioned and sometimes even well informed, much of it is simply howling at the moon. The whole mess is amplified by the complete failure of what’s left of the state’s press corps to inform the public.
Can this catastrophic trajectory be reversed? If so, what would it take? What would that process look like; is there a model? I have described these questions as existential because the answers, or lack of answers, will determine whether Vermonters will get high quality, affordable cost health care, or not. Moreover, the issue is existential for the state as a whole because the Vermont economy depends on the availability of national class health care and the UVM Health Network is the only way to get it. Lose that, and serious businesses will have no reason to come here, or even stay. Our gross state product already ranks 50 out of 50 in the United States. Lose the international airport as well as high quality and affordable health care, and the question will be, who turns out the lights?
How might the UVM Network senior management reverse this trajectory? I outlined an approach in my July 23 post, and it’s repeated here:
What if the management team at the University of Vermont decided: Enough is Enough, and they would fight to maintain their institution, along the lines of the Eric Miller letter? Could the senior management do that? Actually, they could. It would not be technically hard, but it would be politically very contentious. Nevertheless, it has been done before, and it could be done again. It might look like this:
The leadership would set up a team to manage the project. The key people would be the current CEO, Sunny Eappen, and his Senior Vice President for External Relations, Jason Williams. They would both have to be skillful and determined, about which, more below. The other major players from the C-Suite would be the Chief Financial Officer, the Chief Counsel, the Chief Medical Officer, and necessary staff.
The team would determine the total Net Patient Revenue the Network will need in FY2025 to pay the full cost of its operations, plus a four percent margin, an excess of revenue over expenses. (That would be more than the FY25 request). In addition, the Team would determine the 2025 increment of the amount it would take for the Network to recover over a three-to-five-year period the north of $200 million the Board has drained out of the UVM Medical Center in Burlington since 2018. That number is a rough estimate—the Network has not provided a total of the total drain on its finances since 2018.
Finally, the Board would be asked to approve UVMMC spending adequate to hire enough new doctors and support staff to eliminate the excessive wait times for patients needing care. The latter increment could be spread over three to five years.
If the assurances from Governor Scott and the GMCB were not forthcoming, the Network would begin taking the following steps:
Network planners would assemble a list of services UVM provides to the state that do not contribute to the bottom line—regular money losers, in other words. They would include The Level One Trauma Center, the only one serving half the state’s population; the Vermont Children’s Hospital, which provides the state’s only specialty pediatric services; all kidney transplant and dialysis in Vermont; and the state’s only inpatient psychiatric services, high risk pregnancy management, and pediatric outpatient services. The Network would begin to drop those money losers until it achieves its four percent margin by 2028. No law says that a medical provider has to deliver a specific service line of care. Of course, the effect of even taking the first step down that road would be terribly damaging, but Scott and his GMCB are guilty of magical thinking if they act as though Vermonters can have those services without paying for them.
In addition to putting the UVM Network at financial risk, Scott and his Green Mountain Care Board have completely botched their management of OneCare Vermont, the single statewide Accountable Organization. OneCare is the only player in the reform space that has performed flawlessly on its core mission: to enable the state to shift its health care system away from fee-for-service to capitation. Vermont Medicaid used capitation under OneCare to keep its costs under control. Moreover, OneCare has been the vehicle for directing $18 to $20 million per year in hospital revenues to support primary care in the state. Take that away and primary care, already badly stressed, collapses.
However, neither Blue Cross nor the Scott Administration nor the Green Mountain Care Board nor the Feds would permit that to happen in the Medicare system or the private sector insurance business. So, if necessary, the Network would close OneCare, or bring it entirely inside its own structure, and put the tens of millions of dollars in savings toward the four percent margin.
Assuming that the Board and the Governor persist in failing to meet their responsibilities, the UVM Net War Room would mount a broad-based project to inform the Vermont public and the American health care system about their failures. Instruments would include press conferences, newspaper and television advertising, appearances by doctors and researchers at community meetings around the state, and submissions by UVMMC doctors and researchers to various professional health care and health policy journals. (I personally know doctors who are itching to contribute to such a campaign.)
All of that would cost money, of course, and the UVM Network would pay it. The Green Mountain Care Board could issue orders prohibiting one or another or all of the above steps, but the Network would not accept any of them. It would challenge every GMBC overreach in the Vermont Supreme Court, along the lines already set forth in the Sept.23, 2023 letter from the Network board chairs to the GMCB, which asserts that the Board has routinely overreached its legal powers. The Miller letter put sharp edges on the legal framework for such a challenge.
The Network would sue in the Vermont Supreme Court to recover the north of $200 million that the GMCB’s overreaching of their legal powers has already drained from the Network. The grounds could include the claim that the Board’s budget decisions denial of a regulated non-profit entity’s right to get a reasonable return on its investment constitutes a “taking,” which contravenes Vermont law, federal law, and the U.S. Constitution.
A significant factor in the reform space since Governor Scott took office in 2018 has been the posture of the Vermont hospital industry itself. Operating under the heading Vermont Association of Hospitals and Health Systems, the hospitals have focused all their efforts on fending off any effort to rationalize the small hospital structure in the state. No competent health policy analyst would assert the VAHHS position that Vermont’s 625,000 people need 14 full service hospitals. Some 400 pages from a half dozen national firms attest to that. Governor Scott is right that Vermont has nowhere near enough money to confront its many challenges so that recovering a piece of the hundreds of millions of dollars wasted annually on our overbuilt system is essential. Unless VAHHS stops blocking reform by fronting for wasted spending and poor quality, the three UVM hospitals would withdraw its financial support from VAHHS. That would finish off the hospital group because they would lose 60 percent of their revenue over night.
Of course, the mere discussion of such a plan would freak out the dominant reform players in the state, not to mention the public at large, but in fact is it has been done before. In the early 1990s, the rise of Health Maintenance Organizations (HMOs), a new kind of insurance company, put a sudden clamp on health care spending, which had been rising much faster than inflation in the broader economy. Between 1994 and 1997, the rate of inflation dropped in half; we called it a “fixed revenue environment.”
The new model insurance companies got greedy, however, and they began to arbitrage between the payers, who would buy their insurance, and the doctors and hospitals that would deliver the care. The HMO would lean on the payers to pay more for the insurance and on the hospitals and docs to take less. The difference would enrich the HMO.
It was the doctors and other providers who blew up the whole scam. Doctors began to tell their patients that the HMO wouldn’t allow them to give the patients the care they needed. It wasn’t the system’s leaders, or their lawyers and administrators, or government that revolted—it was the doctors themselves. And their patients supported them. It got so bad that if a character in a movie mentioned the word HMO, the whole theater would erupt in boos. The result: Bye, bye Mr. HMO. Now HMOs have reverted to just plain old insurance companies. And hospitals generally have reverted to the inflation rate that had obtained since the early 1970s.
A second example occurred in the late teens when the UVM system got a spike in one year’s normal traffic and made about $20 million over what had been approved by the Board. The Network and the Board agreed that UVM could use the money to build (some) mental health inpatient beds at its Berlin unit, the Central Vermont Medical Center. As the planning for the psych beds proceeded, however, the Board cut the Networks’ annual budgets so heavily that it could not afford to continue the project. So, the desperately needed new capacity went glimmering. The Board itself acknowledged that the numbers wouldn’t work.
These two examples show at least provisionally that an aggressive political offense, added to the Miller legal thrust, could reverse the UVM slide toward mediocracy, or selling itself to a big national like UnitedHealth Group, with $273 billion in assets and $23 billion in income in 2023. That process is happening now all over the country.
Of course, serious offense as opposed to the UVM Network’s current posture of supine defense would be difficult and possibly protracted over some years. There would be huge hyperventilating over cutting some or any of the current loss-leaders. One charge would be that the company, the provider of 60 percent of all the care in the state, was playing the bully.
A reply to that would be pretty obvious. The UVM Network has been falsely charged with being a bully for the last nine years. Nine years, count ‘em. From June of 24, 2015, when a reporter for the Seven Days newspaper in Burlington, on the strength of driving past the looming bulk of the Medical Center and thinking, Wow, That’s a big sucker, wrote a cover story about UVMMC “gobbling up” all the small and independent docs and hospitals in the region. The term ‘gobbling up” by the UVM facility became the meme for the reform years. It still is…
Okay, okay, the above extended sketch should persuade at least some of my tiny corps that what they are looking at is a system failure that is threatening their health care as well as Vermont’s economy. Given the poor performance of all the institution involved, the only way to find our way out of the morass is if the public demands it, and the Legislature gets the message and responds. What would people need to look at?
This post is going up today, Monday, Sept. 30. Tomorrow, Oct. 1, the law calls for the Green Mountain Care Board to deliver their budget orders to the state’s 14 hospitals. That action will provide the grounds for a techy but very important decision: How much of each budget cut flows from the Board’s power to cap a hospital’s budget, and how much flows from a Board “enforcement action” if a hospital has flouted a previous Board order. If a hospital challenges a budget order, the appeal goes to the Vermont Supreme Court; an appeal to Enforcement goes to a Superior Court. Experienced lawyers will tell you those two venues often react differently to the same set of facts.
What we know today is that Eric Miller’s letter on behalf of the UVM Network appears clearly designed to counter Enforcement. Miller’s argument is that the Board has failed to give the Network the chance to provide evidence supporting its case, “due process” aa required by state law. The UVM Network will have, I think, 30 days to appeal or to eat the huge cuts by the Board. I said “think” here because neither the GMCB nor the Network respond to requests for information. Nevertheless, we’ll know soon whether Sunny Eappen, the top Network boss, will take on the budget cuts or Enforcement or both.
That decision is important, but to an extent beyond my experience, the complexity and variety of issues arising out of the Vermont reform project, and the need to save the system are unprecedented. The roots of the reform initiative lie in the 1970s, but the reform effort only fully matured over the last six months. Over the next several weeks, A Vermont Journal will lay out a selection of the most crucial issues facing the state:
One of the most far reaching and egregiously flawed factors in the mix is the 144-page study published recently by Bruce Hamory, a consultant for the Green Mountain Care Board, who has taken over effective control of a path forward for the whole Vermont medical system. Hamory’s work is very light on the realities of actually delivering medical care but is rife with pie-in-the sky directions to solve the state’s housing and transportation problems in the next three years, a wish list that would cost money that the State couldn’t dream of finding. And Hamory’s own reckoning is that his project would leave 13 of Vermont’s 14 hospitals financially under water by 2028. Of course, the UVM Health Network would take the biggest hit.
The Green Mountain Care Board has given itself a significant makeover the last couple of months. In addition to turning the helm over to the consultant Hamory, it has brought in a new top lawyer, apparently to replace the incumbents; and a new policy director, newly fledged from college, who announced his presence by rudely shushing a fellow staff member.'
Moreover, the dynamic among the Board members shifted during the budget process. Jessica Holmes aggressively denounced the UVM Network performance for the first time in her Board tenure. And Owen Foster, the chair of the Board, toggled back and forth between trashing the UVM performance and saying the Board hoped to work cooperatively with the Network. One result was an unusual number of 3-2 votes on budget decisions.
The big new thing in the reform space is AHEAD, a meaningless acronym for a federal program that calls for using global budgets for hospitals to get costs under control. The result nationally will be harmless, but in Vermont the effect would be to lock in the worst inefficiencies of the current system. That did not deter the Green Mountain Care Board, OneCare Vermont, and the management of the Network from signing on…
There are more bits and pieces, but it seems to me a fair conclusion that health care in Vermont is at serious risk, and that none of the responsible institutions has a grip on where we’re headed. A consolation is that we won’t have to wait long before finding at least some certainty. Sunny Eappen and his senior management team at the UVM Network will have to decide in the next 30 days whether to save their own bacon by challenging the Board actions. If they do not, the Network Board needs to replace him. Paying Sunny $25,000 a week for the occasional platitude doesn’t make any sense.
Gov. Phil Scott and Jason Gibbs, his main man, have already demonstrated that they can’t play in this league.
That leaves the doctors and hospitals, the Legislature, and the public to defend perhaps Vermont’s most valuable asset.