Vermont Hospitals Dig in their Heels on Reform

August 18, 2020 Laurie Davis

by Hamilton E. Davis

In my most recent post, I suggested a solution to the most difficult challenge standing in the way of full maturation of Vermont’s health care reform project. The challenge is to right-size the state’s community hospital system, which today makes no medical or financial sense.

The essence of the Manifesto called for maintaining and extending full hospital operations in Burlington, Rutland, Berlin, Bennington and implicitly, Dartmouth-Hitchcock Medical Center in nearby New Hampshire, which delivers tertiary care to the eastern half of the state. The remaining 10 smaller hospitals should be stepped down to clinics of various capacities, depending on local circumstances. The basic task there is to provide strong primary care and emergency services, and possibly maternity care.

What needs to be scrubbed from the community hospitals is care, much of it surgery, that has too little volume to ensure that the doctors and support teams stay clinically sharp as well as too little volume to enable a hospital to achieve a unit price that makes sense. If your hospital is performing 27 hip replacements a year, then the cost per case of maintaining the resources to do hip replacements is a huge waste of money. A Vermont example of that was the maternity unit at Springfield Hospital that was delivering 125 babies a year, a little more than two babies per week. That mismatch was a major contributor to the hospital losing $150,000 a week on its way to bankruptcy court in Rutland. A New York example was the heart bypass operation at the hospital in Plattsburgh, which was doing 110 bypasses a year and helping the hospital to lose $5 million a year — not to mention that the quality was just plain bad. I covered this in a previous post on reform efforts in New York’s North Country.

Despite the obvious need, executing the right-sizing effort would be hugely difficult under the best of circumstances. It will be incomparably more difficult in the face of the full-throated opposition from all the state’s hospitals, including the UVM health network, whose leadership knows, better than anybody else, how critical it is to rationalize the system going forward. After all, the network has already carried out just such an exercise in northeastern New York State: the result put a collapsing four-hospital system there on a solid footing for the first time in four decades.

The importance of getting this right, and getting it right as rapidly as possible, cannot be overstated. Small rural hospitals are crashing all over the country because they are too small to keep up with the complexity and soaring costs of 21st century medicine. The remedy nationally is a wave of outright closings or consolidation into much bigger organizations that are converting increased size into outsized market power. Check out the stock performance of United Health Group: 2019 revenue $242.2 billion; stock price more than doubled since 2016.

The only place in the country where that dynamic is not present is the Vermont hospital system, but the Vermont reform project, and the whole system itself, is in crisis. That squawking you can hear in the distance is every Vermont health policy chicken coming home to roost right now. The loudest squawking is coming from the Vermont hospitals themselves. It sounds clearly in letters that the hospital association chief Jeff Tieman, the CEO of the Vermont Association of Hospitals and Health systems, wrote to the Green Mountain Care Board on March 11 and August 4, and in Tieman’s testimony to the Board on July 15.

Tieman’s basic case is that all the hospitals are needed to deliver care in their current configuration to their communities; that they have no time or ability or need to examine, explain or justify what they do; that the Green Mountain Care Board is overreaching its authority by even asking those questions; and that the Board should just give them the money they say they need. Of course, the hospitals say they are all-in on reform, but that even looking at what is actually going on is a “conversation for another day.” Have I overstated the situation? Let’s look at the Tieman case.

The Hospital Case

Let’s start by unpacking Tieman’s March 11 letter to Kevin Mullin, chairman of the Green Mountain Care Board. Tieman is the spokesman for the hospitals, but his letters, including the March 11 version and a similar, slightly toned-down missive on Aug. 4, were signed by all the hospital CEOs along with some other major players.

Tieman’s first point is that the hospitals “are leading the way in reform” but that the demands of the Green Mountain Care Board are imposing an increasing administrative burden “without a clear benefit.” That is particularly difficult now, he asserted, while the hospitals are fully engaged in trying to manage the Covid-19 crisis. “At all times we must be fully prepared and adequately resourced to meet community need—even a brand new and rapidly evolving need like Covid-19,” he wrote.
These points amount basically to lobbying against what hospitals just don’t want to do. In the first place, the “hospitals” are not leading the way to reform. The UVM system is leading the way, but the others are just trying to keep their noses above water. The hospital association posture is driven entirely by the small hospitals, and has been since reform was first bruited eight years ago. Bea Grauce, Tieman’s predecessor, horrified by the idea of a 3.5 percent cap on annual hospital inflation, warned that the hospitals might not be able “to accomplish their mission” — the classic ‘Your Money or Your Life’ ploy. (The cap actually has worked well) The Tieman argument is squarely in the same vein.
Secondly, the claim that the hospitals are the bulwark against Covid really doesn’t stand up to examination. All the hospitals suffered financially from the loss of revenue during the four months they were shut down, but a major piece of that damage is being made up by federal help, and the hospitals are now back to full operations. The fact is that Vermont hospitals had hardly any actual Covid traffic. The Tieman letter also asserts that, medically, the hospitals are still fully engaged by the virus. That is just inflated rhetoric: According to Dr. Mark Levine, the health commissioner, his office gets regular reports on hospitalized Covid cases, and the number varies from zero to two. That’s for 14 hospitals. Even the statewide number for people under observation in a hospital runs to the mid-teens or less; and almost none of those actually have the disease, Levine said. If a medical organization can’t handle that level routinely it shouldn’t be a hospital. And if a community hospital has a Covid case where the life of the patient is truly at risk, it should transfer the patient to a tertiary center, or at least a facility with a full ICU.
The hospital’s second major demand is that the Green Mountain Care Board move away from a common inflation target and judge hospitals based on their individual performance. Specifically, the Board should acknowledge factors that are beyond the hospitals’ control, including drug prices; salary and wage growth, “given Vermont’s limited and shrinking work force; expense growth owing to aging patients. Finally, the Board should “Base budget decisions on objective data and information.”
Making hospital decisions on a case-by-case basis is a perfectly reasonable proposition, which is probably why the Board does it now. Example: in the 2019 budget hearings, the Board the allowed UVM to charge private insurers two percent more than the year before, while allowing Copley Hospital to increase the same charges 9.8 percent. Different situation, different decision. Happens all the time. Also, pretty striking for the hospitals to describe the salaries they pay as beyond their control. Who else controls them? From 2000 to 2009, every Vermont hospital doubled its budget, and the bulk of that money went to huge salary increases for bigfoot doctors and administrators. And, finally, “Base budget decisions on objective data and information?” That is precisely what the Board is trying to do with its call for sustainability plans, and it is precisely that which the hospitals are terrified of; and it is why Jeff Tieman is desperately trying to fend off the idea. He knows, and every signer of his letters knows, that the current organization of the community hospital network makes no sense medically or financially.
Which is the reason for the main case made by the hospitals in the two Tieman letters and in his testimony to the Board on July 15. The hospitals’ main objection is to the Board’s demand for “sustainability plans” from at least six small hospitals, and possibly more. That issue has been on the table for a full year now, and the small hospitals are totally opposed because they know their current business models are, in fact, not sustainable. Tieman’s specific points in his two letters to the Board:
- Too much information is being asked for.
- The small hospitals do not have the ability to determine the cost efficiency of their various service lines.
- The Green Mountain Care Board request “exceeds the reasonable statutory authority of the Board. GMCB has authority to approve hospital budgets. Any sustainability plan must fit within this context. Themes intended to be addressed by the budget process—e.g., efficient and economic hospital operation, adherence to peer group norms and provision of an integrated holistic system of care-- are lost in the proposed service line analysis.”

And the take home message on reform:

“If sustainability means ensuring each hospital can keep serving its patients and communities, then it is achieved as part of the GMCB’s already exhaustive annual budget review.

“If sustainability means planning and managing the next iterations of health reform and system transformation, that is an important but different conversation.”

There is some more in the hospital screed, but my tiny corps doesn’t need to look much further than the last paragraph. The “efficient and economic hospital operation, adherence to peer group norms and provision of an integrated holistic system of care” are exactly what the system needs, exactly what it doesn’t now have, exactly what the GMCB needs the relevant data to pursue, and exactly what the hospitals are fighting hard to avoid giving them.

Failure to engage with this issue now would be devastating to reform, and to the health of the Vermont system as it enters the third decade of the new millennium. There’s a big chunk of federal money now available to hospitals and it could be spent on putting them onto a sustainable track, or it could be used to just keep trying to fend off the inevitable. Moreover, when the Covid beast goes away, the “smalls” are going to find that neither the federal government, nor state government, nor private insurers will be able to pay the price for a palpably unaffordable system.

We won’t have to wait long to see how this policy conundrum gets resolved. The Green Mountain Care Board will hold its first 2021 hospital budget hearing today. The decisions on the well-north-of $2 billion dollar system have to be reached by late September.

Cross your fingers.

Tiny Corps Speaks; Attention Must be Paid

August 7, 2020 Laurie Davis

by Hamilton E. Davis

My last post was a Manifesto declaring a view about how health care reform in Vermont should proceed. I said there that I would begin to publish comments on these and future posts from my tiny corps of brilliant readers. Those comments and my responses will sit on top of the piece in question. I’ll call it:

POINT – COUNTERPOINT

Toni Kaeding: Oops, Brattleboro?

Right, mistake here. I should have included Brattleboro in the small hospital group.

Bob Zeliff: This is a great and much needed discussion. We need to substantially reduce the unnecessary overhead and improve the efficiency of our hospital and health care delivery system. We have the "bones" of this in place with the GMCB and some limited consolidation done by One Care. What we need is a real vision for Vermont. Neither One Care or GMCB has done this. Both would claim it is not their job. The State leadership must step up with some prompting. Great start with your manifesto.

Zach Sullivan: After reading your most recent piece, I went back to the piece that you'd written almost exactly a year ago (August 5th, to be precise) and the North Country. I actually think that you missed the real heroes of that story - the Board members at Moses Luddington who decided to shut the hospital down (or to put it on a path where they knew it would be shut down - I don't know the particulars of it). That might be worth a little more exploration to see what needs to happen in Vermont if no one has the political will to impose consolidation from the top (which I don't think they will).

I have written about the way the UVM health network has recast the hospital system in far northeastern New York. That initiative involved closing Moses Luddington Hospital in Ticondaroga and replacing it with a primary care, emergency room clinic. The network then integrated the Ti clinic with the community hospital in Elizabethtown and the medium size hospital in Plattsburg. It’s a strikingly effective model that could be adapted to Vermont, if anyone here was interested. I haven’t seen any such interest.

John Perry: This is a fine (not to put too fine a point on it) manifesto, but like others I have read (Marx, e.g., or Dalton Trumbo) it neglects a few details and makes other assumptions about human nature and the power of technology) It might work if, for example, we had statewide broadband and rapid public transit. It might work, also, if we relocated to the five major metropolitan areas. You know, Metropolitan Montpelier, with its massive high-rise moderate income housing developments; metropolitan Bennington with its excellent employment opportunities and industrial center; and a terrific road system (perhaps with teleportation capability) for the outlying areas (outlying, as in more than 1 hour from any of the "metropolitan areas" e.g. most of the Northeast Kingdom.) Perhaps, with enough helicopter pads at the clinics, the transportation to the megahospitals could work.

Your column, as usual, is provocative. The manifesto, as you rightfully acknowledge, needs a little work. For me, I like "socially distant" small hospitals, close enough to me and my family.

John McClaughry: Ham observes that “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…”

This point was powerfully made in 2009 in The Innovator’s Prescription, by Clayton Christensen MD, Jerome Grossman MD and Jason Hwang MD, all of Harvard Business School (2009). In it the authors analyze today’s hospitals from a business management standpoint. They conclude (Chapter 3):

“The organizational paradigm of the general hospital coalesced in an age of intuitive medicine. The entire hospital was essentially a solution shop. But today’s hospitals are substantially different. As technological and scientific progress enabled standardized processes and treatments for precisely diagnosed disorders, hospitals commingled value-adding process and solution shop activities within the same institution – resulting in some of the most managerially intractable institutions in the annals of capitalism…

Hospitals need to deconstruct their activities operationally into the two different business models: solution shops and value-adding process activities...Our biggest and best medical centers will be able to bifurcate themselves. Smaller hospitals, however, will need to focus on becoming solution shops or value-adding process hospitals, or simply expect to be liquidated through disruption.”

    Elsewhere the authors address some additional issues: location-sensitive emergency services, hospice services, and the network function of managing patients with chronic conditions (who account for seventy percent of health care spending, and require regular urging and monitoring.)
    No wonder Ham’s Manifesto has aroused the wrath of the likely disruptees.
    As I observed in my commentary of August 5, what we call “health care reform” comes down to “legislation to have the government compel somebody else to pay more of your health care costs. That ‘somebody else’ includes, variously, the taxpayers, your employer, others in your insurance pool, and the providers themselves.”
    Adopting the ACO model in effect deputized the ACO, mainly owned by UVMMC, to wield the state’s coercive hammer to control costs (every politician’s health care mantra) by forbidding or starving high-cost providers out of business. This has the great advantage of insulating “the government” from making unpopular decisions about which providers flourish and which expire, a major debility of traditional single payer schemes.

John McClaughry is a very conservative policy analyst, with broad experience both nationally and in Vermont. He is my toughest critic; he particularly hates government intervention in what he believes should remain in the private sector. Because of that it is hard for me to engage with him on reform; I once wrote that his views were frozen in the second Jefferson administration (1804-1808) and he responded only partly tongue-in-cheek that I was entirely wrong—that his views centered on the first Jefferson administration (1800-1804). If he gets free of his ideology on American politics and government, he is a surgically precise thinker.

Connie Godin: Love Copley but the skiers could def go to Burl or CVH (I'm old too many name changes) to get their broken bones fixed which has been their cash cow. Maternity should stay there with the "clinic/ER". I like your Manifesto.

Allan Ramsay: This is quite a manifesto. Henry Tufo made a similar argument thirty years ago. "All we need is five or six hospitals and some fast ambulances."

Here are my thoughts on what the eight hospitals could become:

1) Regional Primary Care Hubs: focused on prevention but including urgent care, retail care, mental health, telecare, home visits, laboratory testing, and imaging. (Birthing center would be optional but the malpractice costs would probably be prohibitive.)

2) Centralized care management and community based services. Including the "hospital-at-home" concept, home based rehabilitation and long term care, and comprehensive end of life care.

3) A hub for management of the social determinants of health including nutrition, housing, transportation, aging, and broad band access.

I spent time in Cuba several years ago to understand how they delivered health care and achieved such good outcomes at low cost. I wanted to set up an elective rotation for our family medicine residents. This is exactly how their regional delivery system works. The rotation did not work out because of a diplomatic shift (Bush called out Cuba as part of the "axis of evil"), but I learned a lot.

Allan Ramsay is a veteran primary care doc with some four decades of practice, mostly in the UVM system. Former member of the Green Mountain Care Board. Most knowledgeable member about the workings of the delivery system, then or now. Powerful advocate for the primary care physician community. We disagree about some aspects of reform, but I think he is a hugely valuable player on the reform field. I listen to and parse every word he says. BTW, the late Henry Tufo was one of the most influential docs to work at UVM in the modern era. I consider him my mentor, and Allan worked with Henry for many years.

R. “Mort” Wasserman: Enjoyed reading this manifesto, especially the references to hospital affiliation. The state faces some difficult choices. Are you familiar with the recently published Rand study on rural hospital affiliation and its consequences?

Yes, I am familiar with Rand and the issues surrounding hospital consolidation in the U.S. I will write about that issue soon. An interesting aspect of that is how far in the weeds some key members of the Legislature are on that question.

Paul B. Stanilonis: I am an Octogenarian and think that centralized Montpelier and gov has spent millions and has very little to show for it when looking at healthcare reform. To think they will get it correct--- dream on.

Your current journalistic effort is well done and ultimately the healthcare system will implode in Vermont. It will be driven by market forces and hospitals will close in bankrupt condition. This mess will see systems fail:

1. More and more Vermonters will be unable to purchase health insurance

2. Vermont businesses will not be able to afford Health Insurance

3. The cost of healthcare will continue upward driven by covid-19 demographics and ever exploding tech inventions, to say nothing about the capitalist pharmacology business model

This whole mess is driven by the fact there are too few people paying into the money pot. The all payor model will fail without more people paying in. We need to completely redesign the business model. Vermont does not have the population to do it alone. When you were younger, Vermont and NH Blue Cross Blue Shield shared the burden. UVM Medical Center has the vehicle for reform. Capital Health Care-Kaiser Permanente all failed. Cost too high and not enough people paying in.

Green Mountain Health Care Board will keep pussyfooting around, spending over 2 million a year while the system fails. As you well know, a shortage of providers in primary care is looming.

Northern NY – VT – NH based on service areas should have a united business plan. How we deliver healthcare needs to be a baseball game!! Not built on golf, tennis and cronyism. Montpelier – politicians should not be the design build folks.

Anyhow, stay well, wear your mask, stay home, wash your hands and keep writing. There are a few of us reading!!

The Right Path for Reform: A Manifesto

August 2, 2020

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, Brattleboro 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.

The Right Path for Reform: A Manifesto

August 2, 2020 Laurie Davis

by Hamilton E. Davis

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.

So, as always, Caveat Lector.

GMCB St. Albans Decision Telegraphs Reform Issues

May 16, 2020 Laurie Davis

by Hamilton E. Davis

The Green Mountain Care Board last week unanimously denied a request by Northwestern Medical Center for a 14.9-percent rate increase. The decision on the St. Albans facility’s plea was based on the Board’s sharp criticism of both the hospital’s strategic decisions, and the way that the hospital’s case for the request seemed to change over time. The hospital’s response was equally sharp: its spokesperson said that the decision would inflict significant damage to the hospital’s financial status and to its services. He described the Board action as “not responsible.”

The Board decision increased the heavy financial pressures weighing on Northwestern (NMC), which has lost money the last three years. It also illuminated a range of issues that affected all the community hospitals in Vermont; those issues will come to a head over the next six months as the Vermont delivery system confronts the financial damage from the Covid virus as well as the challenges of the final stages of the health care reform project in the state.

According to hospital officials, Northwestern was on track to lose $9.6 million this fiscal year, which ends Sept. 30. The proposed increase would have generated $3.8 million in the remainder of the year, reducing the loss to $5.8 million. The hospital attributed the loss to two major factors. The first was a drop in revenue stemming from the installation of a new electronic medical record system: learning the new system meant that doctors saw fewer patients each day. The second was a roughly four-fold increase in the money needed to pay outside nurses to fill in gaps in the staff.

It is important to note that the appeal for a higher rate was made before the advent of the Covid crisis, which flared in March. Like all the hospitals, Northwestern incurred large new losses in the wake of Covid, but those cannot be quantified because they are being offset by a direct flow of financial aid to all the hospitals by the federal government.

The Board’s analysis assumed that the Covid upheaval will be a one-time event while issues generated by the rate increase will drive the hospital’s business model going forward. And that analysis amounted to a powerful indictment of the hospital’s case as well as its performance.

The Case Against the Increase

The case against the appeal as well as the hospital’s performance was led by two of the five Board members—Jessica Holmes and Maureen Usifer. Over the course of several hours of public discussion, beginning last December, Holmes, Usifer and the other Board members made the following arguments:

An overarching complaint by the Board was that members didn’t have a clear picture of what was going on at the hospital. In a series of presentations, both oral and written, beginning late last year the hospital officials gave vague or contradictory statements about such critical issues as patient volumes, and the financial implications of the hospital’s business model. Also in general terms, all the Board members commented that it makes no sense to approve a huge rate increase to Northwestern now when the 2021 budgets will be due in July; and the Board can consider the Northwestern issue as part of the systemic problems at all the hospitals.
A major problem was that the hospital was never clear whether the expenses arising from the electronic medical record were permanent or transitory. If they were transitory, then the money would come back as the staff got more familiar with the system. In that case, it would make no sense to bake those costs into the fee structure going forward. A one-time expense requires a one-time fix, like taking money from the hospital’s cash pool.
On the last issue, the Board members noted that Northwestern has the second highest level of cash on hand among Vermont hospitals. The median level of that standard financial metric is just under 120 days, whereas Northwestern’s is north of 180 days. The hospital could get the cash equivalent to the rate increase for the current fiscal year by using 15 days of its cash on hand, the Board said, adding that the hospital would still be well over the Vermont median in cash on hand.
A related issue on the loss of volume was whether the hospital had lost doctors. In the hospital’s written submission in April, officials said they had lost 10 doctors, a quarter of their staff. If that many doctors were gone, then the loss of volume would be permanent and the whole business model would have to be recast. The problem was that in the last hearing, hospital officials said that they didn’t think they had lost that many, possibly just a few. The hospital never came up with an actual number. The loss, they said, was the result of doctors who would normally see, say, 20 patients a day could see only 18 or 19 because they were struggling with the new record system.
The amount of the increase was huge, bigger than anything the Board had since its inception in 2012. And It wasn’t just the 14.9 percent amendment to the budget—the original budget passed last fall authorized a rate increase of 5.9 percent. Total is 20.8 percent for the fiscal year. The full year cost for the 14.9 ask would have been $9 million; the five month cost would have been $3.7 million. Moreover, the entire tranche of new money would be paid by private sector payers, mainly Vermont Blue Cross—state and federal governments, which pay half the system cost, would pay nothing extra. This feature would exacerbate one of the Board’s perennial concerns: whatever the merits or demerits of any particular line item in the budget, the overall cost of health care was already too expensive for Vermonters to afford.
One of the most troubling implications of the rate increase was that it would be used to support a fully elaborated Intensive Care Unit (ICU). The hospital now has a few beds in what it calls an ICU, but it said in its appeal that its nursing staff is not currently trained to the level necessary in a unit whose purpose is to manage the most dangerously ill patients. The hospital said it would fill that gap by hiring ICU-trained traveling nurses, reinforced by a telemedicine tie to the ICU at Dartmouth-Hitchcock. The hospital said that it wasn’t denigrating its “tertiary partner,” the University of Vermont’s Medical Center Hospital; but that appeared to be the implication. UVM says that it can accommodate any St. Albans patients that need an ICU. In any event, the Board pointedly questioned why Northwestern would assume the very high costs of an ICU when there was a fully-credentialed unit 30 miles down the Interstate in Burlington.
The Board also wanted to know whether, in beefing up the capability of the ICU, the hospital had calculated whether it would lose or make money on the unit. The buzzword for that element in accounting land is “contribution to margin.” In English-speaking land that means that if you take the cost of building and running the service, and divide by the number of patients you expect, will you get a unit cost that makes real-world sense. The hospital said that it could calculate contribution to margin, but it didn’t actually do so.
In its line of inquiry, the Board tied the issue of contribution to margin to the reform project, which in its final stages is facing the question of the long-term structure of the small hospital system. In its budget orders last fall, the Board directed several small hospitals to develop “sustainability” plans to address that issue. In a March letter to the Board, the hospital association mounted a broad-scale attack on the whole Board agenda:
“It is not currently possible for the majority of our hospitals to accurately calculate a contribution margin on a particular service line. Many factors and assumptions are involved, which differ from hospital to hospital. For example, expenses can be differently allocated across service lines.” The Board said it was interesting and encouraging that NMC could do just that.
The Board expressed strong disappointment that the hospital’s cost cutting strategy eliminated elements of its population health program, like the community exercise program Rise Vermont that had been a high priority in its list of community priorities, while allocating new money to a sleep program that hadn’t been mentioned on the priority list at all.
The Board’s questioning reflected obvious impatience at what it saw as a tendency on the part of the hospital to change its narrative and response to questions through the year, beginning with back-and-forths with the Board late last year, and in February and April of this year. A particular sore point, in addition to the loss of doctors, was the issue of the hospital dues to OneCare Vermont. The hospital said some months ago that the roughly one million dollars annual dues was one of the causes of its financial difficulties. The later communications, however, dropped the OneCare issues in favor of the loss of volume in the medical practices and the cost of travelers.
The Hospital Responds

The following response was provided by Jonathan Billings, vice president for community relations who worked for the hospital for more than 30 years. I have tried to line up his responses with specific points the Green Mountain Care Board set forth to explain its rejection of the hospital’s request for a 14.9 percent mid-year increase in the rates it charges commercial payers. In no particular order:

In the overall sense, Billings said the hospital was very disappointed in the Board’s response to its plea for help. Northwestern was one of the earliest and most enthusiastic proponents of the reform project in Vermont, he said. The hospital was the only facility other than the UVM network to join in the capitated risk contracts that are the engine for reform. Billings said the hospital understands that costs need to be constrained, but that the Board needs to decide what services are needed where; and then ensure that those services can be adequately funded. For example, he noted, the Board approved the for-profit surgical center in Colchester that drained off a significant volume of NMC surgeries, which contributed to its losses. He added that NMC will continue to seek a rate increase as part of its sustainability plans in the upcoming hearings for the FY2021 budgets.
On the issue of the workforce at Northwestern Medical Center (NMC). Billings said that the maximum capacity of the hospital is 43 beds, but that the number of staffed beds runs around 30 to 35, depending on patient flow. That figure is bigger than the eight facilities in the state that are rated Critical Access Hospitals, which are limited to 25, but it still ranks well below not just the UVM Medical Center Hospital in Burlington, but also Rutland and Bennington and Central Vermont in Berlin. It is a very small hospital.
As to whether NMC changed its story on whether its problems with patient volume came from a loss of staff, Billings said that any given number would be a “snapshot in time”, that doctors come and go, and the effect on volume changes depending on whether the doctors are new and just building practices, or are locum tenens (hired docs to fill a vacancy on a temporary basis) as opposed to well established physicians. The result, however, is clear—reduced revenues.
On the addition of a sleep disorder service, Billings said that was really not a new service—it was a natural extension of the pulmonology service at the hospital that had been temporarily suspended owing to a doctor retirement. It made sense, he said, because the new pulmonologist was experienced in sleep issues, and there is a long waiting period for sleep disorder treatment at UVM in Burlington.
On the Board’s suggestion that the hospital use its large block of cash on hand to make up the $3 million shortfall for the next five months, and resubmit its request in the 2021 budget, which is due on July 1, Billings said NMC will resubmit its request, but that it needs to be prudent about its use of cash to fund losses. The reason, Billings said, was that hospital officials are worried about the trajectory of the number of days of cash on hand, which is an important metric when considering the solvency of a business. A few years ago, Northwestern had 350 days cash on hand, and, given its recent skein of losses, the projection for the current year is around 150 days. If that drops another 15 days, Billings said, the hospital would be getting too close to the 100 days level, which would trigger its bond covenants and eventually threaten its existence.
On the issue of whether NMC should operate an ICU when there is a fully manned ICU 30 minutes down the Interstate in Burlington, Billings said the hospital believes that its approach to the ICU issue is measured and reasonable. The ICU has four beds. In response to the Board suggestion that they might not need an ICU at all, Billings said that the physicians stratify care according to what they can safely do, and they send worse off patients to Burlington or even Boston in extreme cases. Small numbers of critically-ill patients make it difficult to retain ICU trained nurses, forcing a reliance on travelers, who are more expensive. The telemedicine tie to Dartmouth will help address that shortcoming.
On the issue of the financial viability of high-intensity service lines, Billings said that his hospital has the cost accounting capacity to test those service lines, and that it does so all the time. A specific example is spine surgery performed by a single member of its orthopedic team for several years; for the past several years, Northwestern has been the only small hospital to carry out spine surgery with a single member of the staff. Billings said that NMC is careful to limit its physicians to things they can competently do. He added that the Green Mountain Care Board is going to weigh in on what service lines a hospital will offer, it will have to decide what it wants the entire small hospital network to look like going forward. If small hospitals aren’t allowed to do medically appropriate services that are financially beneficial, they won’t be able to survive, Billings said.

The Virus Papers, Part 6: Looking Good So Far, but the Horizon is Still Misty

April 24, 2020 Laurie Davis

by Hamilton E. Davis

A Vermont Journal embarked on these Virus Papers less than a month ago on the assumption that my lengthy apprenticeship in health policy might enable me to make a contribution to the process of fending off the Covid-19 threat to our Green Mountain Home. It has been a wild ride, but I think the fundamental issues of epidemic management have been solved. That doesn’t mean the battle is over—it isn’t.

But it seems time to sum up; to lay out the lessons learned and what the run-out looks like over the next few months, beyond which no one has a clue. So, what did the Virus Papers amount to, and where do we stand now?

As of the week of April 20, Governor Phil Scott, to use his own metaphor, is opening the spigot a quarter turn at a time—permitting operations by such relatively manageable categories as small construction crews, lawyers, and accountants. The Scott team has wrapped this move in a blanket of exhortations to Vermonters to maintain their vigilance by social distancing, wearing masks and the like. The Scotties are terrified (not too strong a word) by the risk that lifting the pressure on the brakes too early will generate a resurgence of the virus. That worry is justified, since we don’t fully understand the virus itself, let alone how to manage into the summer and fall.

Still, it seems clear to me that the Scotties have a pretty fat margin of error. The original yield from the epidemiological model was a trio of curves denoting the unconstrained progress of the virus (catastrophic), most likely scenario (manageable by the health care system), and best case scenario (matching South Korea, which would be out of reach). In fact, it now appears that we are on a track (535) below the best-case scenario.

I say appears because the state reporting on the output of our own epi model has shifted away from the backside of the curve and the run-out, which would show where the new hospitalization for new cases approaches zero. The actual data is obviously valuable, but so are the projections of the model; if they are not, we shouldn’t be paying for the damn thing. (We are already in the zone where we are spending money we don’t have). I would be willing to bet that the model shows a statistical return to normal--zero or very near zero on the x-axis for the key metrics--by June 1. (more about this below)

Moreover, the actual data still conflates the presence of the virus in totally contained populations like the inmates of state prisons and nursing homes and the general public. That is ridiculous. The prison inmates are obviously highly vulnerable because they are closely packed in, but they aren’t going anywhere because they are being guarded, literally, by people with guns. The situation with nursing homes is equally clear. So why isn’t the real-world data available to the public? Speaking of which, why has Mike Pieciak, the Commissioner of the Department of Financial Regulation and the chief wrangler of the epi model, been absent from the trice weekly press conferences?

None of this means that Scott should exceed his very cautious “quarter turn of the spigot at a time” approach, but the fact is that we cannot avoid some risk in getting our state economy back in action. And the Scott team, which obviously has the run-out curves from the model, should share them with Vermonters. The Scott team has been doing a good job, but it is the people of the state who are doing a lot of the heavy lifting every day and they should be partners with the Scotties in the effort. The Scotties are sharing some of the output curves from its model, but not the model itself.

The relevance of this distinction can be seen in the two figures below. The first shows what seems to me the most informative curve from the Department of Financial Regulation web site. It shows hospital beds occupied by Covid patients trending toward low single digits over the next several weeks. That is the dashboard reading available to the Governor as he contemplates the next quarter turn of the spigot.

At least part of the risk, however, could be found in Wednesday’s New York Times, which compared the output of several models in use across the country. They included epi versions from MIT, Columbia University, lmperial College (London) and Northeastern University. Our model is Northeastern, and to the inexpert eye (mine) it looks like our model is the most optimistic one in use. Someone should ask Mike Pieciak whether he is concerned about that. The Times survey is national, however, and the actual data from Vermont looks every bit as optimistic as the model is showing…still, worth thinking about.

Credit: New York Times “What 5 Coronavirus Models Say the Next Month Will Look Like” 4/22/20

Further Reflections

Re: contact tracing: It has been a winding path, but we now have a clear picture of where we stand on the one of the most critical tools available to the virus managers. In full-on contact tracing, you interview anybody who has the Covid disease about anyone they have had recent contact with.
And then, you test those contacts, all of them.
That is how the South Koreans stopped the virus in its tracks, and it is what Germany is doing now. In a recent press conference Dr. Mark Levine, the health commissioner, said that in the Vermont effort, they interview the contacts and then recommend that those people self-quarantine for 14 days. That is a good thing, and a clear advance on the pre-tracing situation, but it is not full-on contact tracing.
The obvious hole in the donut is the asymptomatic carrier, not to mention the inevitable leakage in self-quarantining: “Well, I had to get some milk and my car is out of gas…” The asymptomatic carrier is the core of the core of the problem going forward. In a recent report, The New York Times said the reason the federal Centers for Disease Control shifted its position on the wearing of masks by the public was the asymptomatic carrier. The problem, of course, is that testing all the contacts would require a dramatic increase in the use of the testing reagent, which Vermont doesn’t have. New York Governor Andrew Cuomo made the point last Friday: “You have to develop a testing capacity that does not now exist.” So, Vermont is doing the best it can with what it has available. But, contra Doctor Levine, it is not full contact tracing, and, contra Mike Smith, the testing program is not “robust.” Were it so…
The Dartmouth-Hitchcock conundrum: When the Scotties first laid out the medical capacity available to deal with the virus, they toted up the number of hospital beds available, the number of ICUs and the number of ventilators. They did not, however, include the resources potentially available at Dartmouth, which is just across the Connecticut River in New Hampshire. There were two reasons for that. One was uncertainty about whether the State of New Hampshire, in the face of an emergency, might force D-H to limit their capacity to New Hampshire residents. A second, I believe, was that the Scotties were trying to build in all the redundancy and fat margin capacity they could to aid both in the management of the virus, and the state of public morale in Vermont.
Now that we are on the downhill side of the curve, it is critical that the Scotties figure out and regularize the role of D-H in the Vermont delivery system. The whole eastern part of the state, and a not insignificant part of the rest of the state, utilizes D-H, mostly for high end, tertiary services. Forty percent of Dartmouth’s patient traffic consists of Vermonters. Yet, we know almost nothing about it. That is a hole in the management of the health reform project; but it is also a vital element in post-virus planning. To that end, we need to see and understand the flow of Covid patients into D-H over the last month. How many Vermonters went there for Covid treatment? Was it stratified—that is, did more serious patients bypass local hospitals in Vermont to get to D-H? What was the D-H ventilator capacity, and what percentage of that was used by Vermont patients.? ICUs used?
A related issue: We’ve had relatively little actual medical reporting on the virus. There has been some of that nationally, but it was thin there also. The disease attacks the lungs, but in an idiosyncratic way. And it’s tricky—it can also affect other organs; a victim may need kidney dialysis, for example, and it apparently can cause heart problems. And sneaky: I have seen stories about patients failing to understand the seriousness of their symptoms because the oxygen levels in their blood had dropped, without other symptoms being evident.
We haven’t seen what percentage of confirmed cases need a ventilator; and it would be good to understand the qualitative outcome for ventilator patients. The national press and the web have carried stories about patients surviving the ventilator, but at a catastrophic cost in quality of life.
Government: To an unusual degree, the Covid crisis has given Vermonters an intimate view of their own state government. That sense was amplified when the Vermont State College debacle broke into public view a few days ago…So, my general view is that Phil Scott has done an excellent job steering the ship through the virus challenge; I think the same is true of his team, not withstanding my caveats about whether the Scotties could bring their game up even more.
On a longer reach, however, I think that the combination of the virus management with the uproar about closing the two northern state colleges has illuminated a pattern in the performance of Phil Scott as Governor. In brief, it looks like this: Scott’s performance differs markedly depending on the type of problem he has to confront. On clear-cut, dramatic public issues, like the virus and the earlier problem about the threat of a possible shooting in a Vermont school, Scott stands right up—calm, firm, strong, gutsy. His performance on the guns issue was striking: he abandoned an earlier hands-off posture, advocated an important gun control, and then went out on the state house entrance to sign the bill, facing a very hostile crowd of gun advocates.
On the other hand, Scott’s reaction to the state college was the kind of mushy, evasive posture that marked his performance on earlier dust-ups, like his battle with the legislature over health insurance for school teachers. In the current state college issue, Scott said he didn’t support the proposal by Jeb Spaulding to close three northern institutions, but that he didn’t have any proposal of his own. The governor got a break in the form of a very short public notice on the issue by Spaulding, but that was just luck. A three-day notice. The horror!
In fact, it wasn’t a three-day notice; it was a three-year notice. The state college mess has been building for years; 25 years ago the faculty got paid less than high school teachers. So, even before the virus took over center stage, the Governor and his team had to know that the fiscal crisis for the colleges was cresting; and that nobody in town had any answer to it. The brute force answer: levy the taxes necessary to pay to keep the northern colleges running in a collapsing educational market. Scott contemplates that the way he would blowing a head gasket and all four tires when driving his race car at Thunder Road. Of course the usual subjects in the legislature went into full on hyper-ventilating mode…puffing themselves up, calling in the cameras.
The reality, however, is that nobody has the faintest clue how to make the state colleges dilemma go away, and after wasting a lot of time, and probably a lot of money, they’ll end up pretty close to the Spaulding plan. The lone note of sanity that I’ve seen was a comment to VTDigger by State Sen. Philip Baruth of Chittenden County:
“If anybody believes that we’re going to move this decision into the Legislature to vote to keep these campuses open and get away without a price tag of hundreds of millions of dollars you’re kidding yourself,” Baruth said.
The broader point is that Vermont lacks the capacity to deal with truly complex problems, like a declining rural population, the attendant drain on elementary and secondary education, the need to recast the community hospital system, the lack of modern telecommunications in rural areas, and, of course, the state colleges. On all of these hairballs, neither the Governor nor the Legislature has any idea what to do.
It used to be at least somewhat different. Governors used to have a fully staffed planning office to develop solutions to difficult problems, and very serious people worked there…that all gone now. As for the Legislature, it is amateur hour. The members are part-time, and they have no staff. The leadership of the House and Senate each have an assistant or two; and there is a small Joint Fiscal Office group that mainly serves the interest of the most powerful legislator. There can be very strong players in the various departments, but at the upper reaches of the executive there is no credible policy making expertise, especially on issues that cross department lines. Something to ponder.
Variation on a theme:
As we have seen in the past (I won’t bother with any more links), failures by the press can be extremely troublesome. In my last post, I cited the claim by Joe Woodin, the CEO of Copley Hospital, that the antibody test he was running on his staff was a “breakthrough, a game changer.” This claim was amplified by worshipful coverage in VTDigger. Others may be tempted to make the same claim. They may want to consider the warnings published over the last week or so.
From the Washington Post, April 19:
“Testing experts warn the risks of inaccurate testing are high. A wrong result could, for example, indicate individuals have immunity against the virus when they don’t, potentially resulting in behavior that would endanger themselves and their families…Even for high quality tests, scientists say, they don’t know the level of antibodies to make someone immune from the virus or how long the protection might last.”
From The New York Times:
In a story about the dangers and misuse of the antibody tests, the Times story said the little federal guidance on the use of antibody testing “is so confusing that health care providers are administering certain tests unaware they may not be authorized to do so. Some are misusing antibody tests results to diagnose the disease, not realizing they can miss the early stages of infection.
“People don’t understand how dangerous this test is,” said Michael T. Osterholm, an infectious disease expert at the University of Minnesota. “We sacrificed quality for speed, and in the end, when it’s peoples lives that are hanging in the balance, safety has to take precedence over speed.”

So, what do we still need to know? Probably a lot of things, but there are a few things that should be easy. They include the record of hospitalization of Covid patients by hospital, not just county; that information will be critical to health care reform going forward. And Mike Pieciak should disclose the inside of the black box of the Northeastern epi model. And given the very strong likelihood that both Dartmouth and UVM are running their own models (they couldn’t train infectious disease doctors or epidemiologists or virology specialists without them) the Scotties ought to disclose those also.

The Virus Papers, Part 5: Cognitive Dissonance for the Covid Era

April 17, 2020 Laurie Davis

by Hamilton E. Davis

As we transition from the winter of our discontent to our spring of who-the-hell-knows, A Vermont Journal thinks that we are at an inflection point in the arc of Covid-19’s passage through our Green Mountain home. We have been hunkered down for a couple of weeks now with the expectation that the “surge” will be upon right about now. And that’s what it looks like. In fact, the surge may be over.

The trace of both total cases and new cases per day are flattening, and I will argue below that for the general population, as opposed to potential hot spots like prisons and nursing homes and aircraft carriers, we may well already be on the backside, the downhill side, of the epidemiological curve. Of course, even if that supposition is reasonable it does not support a letup in our defensive posture; I believe that Governor Phil Scott did the right thing in extending the shutdown for another full month. Still the numbers are the numbers and they look very encouraging to me.

In any event, it seems like a good time to assess the performance of the Scott administration’s Covid team over the period of the epidemic in Vermont. That process will get my tiny corps of brilliant readers to the dissonance part.

On the front end, I believe that the Scotties have done very well to date. The team is led by the Governor himself, who has done a terrific job. He has assembled a strong team, and led it well: he has been calm but firm in outlining his strategy and candid about the difficulties ahead. An important piece of evidence for that is the response of Vermonters themselves, whose voluntary acceptance of the Scott regimen has not just moderated the growth of the virus, but has driven it well below the ‘most likely” track generated by the epi model. By my rough calculation, the “reality” track moved half the distance down to the “best case scenario,” which is defined basically by the performance of South Korea. South Korea has established itself as the gold standard for democratic countries in the Covid management biz.

The day-to-day management of the Vermont response has been led by a troika made up of Mike Smith, the Secretary of the Agency of Human Services; Mike Pieciak, the Commissioner of the Department of Financial Regulation; and Dr. Mark Levine, the Commissioner of the Department of Health. The Commissioner of Public Safety, Michael Schirling, weighs in when needed.

The Scott team holds a press conference every couple of days. Smith plays a dual role in these efforts. In general terms, he speaks for the Governor and the whole administration; he tends to elaborate on and pound home the Governor’s message about the need for vigilance—social distancing, closing down all but essential activities. He also speaks specifically to any problem in the prison system, of which there have been many. Corrections is a part of the AHS portfolio. He also plays a role in the regulation of nursing homes. And Smith acts as quarterback, handing off some questions to Levine or Pieciak.

Mike Pieciak, the DFR commissioner, pretty much owns the whole technical side—the state’s modeling of the virus effects—as well as the data that moves every day, the total number of cases, the number of new cases, etc. Pieciak, not as well known to the public, speaks quietly, but radiates a steady sense of competence. His agility with the numbers comports with his day job, which includes regulating the insurance industry. That process involves the efforts of actuaries, who forecast the movement of the kind of numbers that lie at the center of the virus models.

Mark Levine, MD, the health commissioner, actually also works for Smith as AHS boss, but he has an outsized role by virtue of the fact that he is a doctor. All the other players, including the Governor himself, tend to defer to Levin for that reason. My conversations with a variety of policy players over the last month or so reflect a consensus that Levine has played well; he has developed a valuable amount of political capital in the process.

Sounds Good, Where’s the Dissonance?

A preliminary note:

The work the Scott team is doing is really, really hard. Nobody on the Scott team, and nobody off it for that matter, has done anything quite like this before. The team members have to juggle three balls at once. They have to decide, in the face of great uncertainty, just what to do next. Then, they have to communicate it by providing the public with adequate, credible information. And they have to avoid scaring the bejesus out of the public in the process.

If my tiny corps will forgive a sports metaphor, you can watch 10,000 basketball, football or hockey games and not have the faintest notion what it’s like to actually play in one of those games. In the game underway now, anybody not actually playing is a member of the peanut gallery. And modesty, humility and empathy become peanuts…still, the peanuts have their role. Hence:

The Scotties have played well, but I think they can play somewhat better; and, moreover, I think they need to because there is a second wave coming. The second wave is already guaranteed and it’s huge—not the virus, the cost of the virus. More about that later. First, playing better:

The most difficult challenge once we are able to keep people alive is how to restart our economy. Scott has talked about that several times, but in generalities. It won’t be all at once, he says. “We’ll turn on the spigot slowly, a quarter turn at a time.” We can do different industries and different regions at different times…
That all sounds good, but actually doing it will be really tricky, and will require a very sensitive reading of the epidemical curve. The Scotties may have such a reading, but they are not sharing it with the folks anywhere clearly enough. Most of the data they are pumping out stops each day. The only data is actual data. But the whole reason to have an epi curve in the first place is to get the best possible fix on where the system is going. It costs serious money to build the epi model and then refine it as the data flows in. Not many people will care enough about the track and fewer will be able to assess it; but that number is not zero.
The peanut gallery needs humility, but so does the Scott team. As a practical matter, there are people in Vermont, a not insignificant number among them members of my tiny corps of brilliant readers, who know more about epidemiology than Mike Pieciak, more about medicine and biology than Mark Levine, and more about how to run a state than Mike Smith. It would be very smart of Phil Scott to make sure that his team guards against exuding a sense of—don’t worry your little heads about these technical complexities, we’re the experts, you can trust us. If you want to see an example of a guy doing it right, check out New York Governor Andrew Cuomo’s performance. It’s really good.
So, I believe, and some people who understand these issues better than I do believe, that we are already on the backside of the curve. Are we wrong? Possibly. But let’s see the full run-out of the model.
A further modification to the model that seems obviously necessary to me is to split the rate of new cases into two categories, the first from obvious hot spots like prisons and nursing homes, and the second from the general population. A particular marker came about a week ago, on April 10. The new cases for that day showed an increase of 33 in Franklin County. The other 13 counties showed no new cases at all. I believe that all or most of those 33 came from a state prison in St. Albans.
It seems obvious that the management of nursing home residents and prisoners is very different from managing the virus that lives in the general population. Prisoners and nursing home residents don’t generally have to go to work, shop for food, go out to the movies, or drive to Boston to see the grandkids.
Managing the virus inside prisons and nursing homes is obviously difficult, but the job is perfectly within the capability of Mike Smith and his AHS team, and we ought to leave it to them. The central issue to reopening the economy is the general population, and Mike Pieciak ought to let us all see what the runout curve looks like when the confined populations have been stripped out.
Virtually every action taken, and every word spoken on health care over the last month has been tightly focused on defense against the virus. No attention has been paid over that time to the health care reform project that has occupied a major swath of state government since 2011, and which was entering its critical stage when the virus intruded.
That issue needs to move back to center stage now, for a very good reason: the finances of Vermont’s hospitals, as well as much of the broader health care delivery system, have collapsed. The federal government is providing an infusion of money to help. Some of that money is in the form of loans to hospitals, the remainder is in the form of outright grants. It isn’t clear the extent to which Vermont state government has any voice in how the money is split up among the various facilities.
The importance of that issue lies in the way the onset of the virus coincided with the final phase of the state’s health care reform project. The core of the reform project—the last big step needed for full maturation of the project—lies in the recasting of the state’s small community hospitals. That effort has been manifested in the Green Mountain Care Board’s orders to a half dozen smaller hospitals to produce a “sustainability” plan in conjunction with their FY 2021 budget submissions. The common problems they faced—pre-virus—included falling patient traffic, expenses rising faster than revenues, and negative bottom lines, year after year.
Just shoveling money into that system with no clue whether the recipient hospital’s business model makes sense medically or financially will be to just waste it. And by next fall, when the virus is reasonably under control, the financial tsunami will be devastating not just for the hospital system, but Vermont state government itself. Every taxpayer dollar, state or federal, needs to be spent as wisely as possible because the surest thing in the current situation is that there won’t be enough of them. The Scotties need to be thinking about that now. And they need to begin preparing the public to think about those issues also, because the public’s money is what they are playing with. A suggestion to Mike Pieciak: we will need to see a day-to-day listing of the Covid patient loads not just by county, but by hospital. Trust me, that data will be crucial when we hit the Class 6 white water that lies just downstream. Thanks.
I think that Mark Levine could bring his game up a bit. He’s obviously fully professional and the whole state is riding on his judgments, but I’m uneasy about some of them. In a direct answer to my question a couple of press conferences ago, Levine said that the Scotties were going to begin contact tracing, which is actually now a term of art rather than a general posture. The issue is whom you test for Covid-19, and when. I wrote about this in an earlier post; I called it tracking then, because I hadn’t heard the new term. The idea is that whenever you test somebody and find them infected, you isolate and treat them; but you also talk them and find out who they have had contact with. Then you find and test those people—even if they don’t have symptoms. That is the way you get beyond obvious hot spots like nursing homes, prisons or aircraft carriers; the hard nut to crack is the penetration of the virus into the general population.
That is how South Korea knocked the virus flat in two months. Their extensive contact tracing took them right into the body of their general population looking for every version of the Covid beast. Their ability to do that depended not just on an aggressive strategy, but on the availability of all the testing reagent they needed. We don’t begin to have that. Real contact tracing in Vermont would require turning half of Shelburne Bay into testing material, which I believe my tiny corps would agree is not likely. When discussing the management of nursing homes and prisons, Mike Smith occasionally uses the term contact tracing to refer to a decision to test everybody in a nursing home if some residents already have the virus. Given the hairball Smith has to deal with every day, I don’t care what he calls it. But the Scotties need people to understand that our defensive toolbox does not include contact tracing. And the guy that ought to explain that clearly is Levine.
A more serious complaint:
A short time ago, VTDigger published a report that Joe Woodin, the president of Copley Hospital in Morrisville, had taken a breakthrough step by utilizing a test to determine whether his staff members were carrying antibodies that would render them immune from the Covid virus. The Digger story on this piece was a typically overwrought piece of sloppy journalism, which I’ve dealt with before (see my posts from Oct. 22, Jan. 7, and Feb. 18), and I would have just written it off as such. What jumped out at me, however, were the Digger quotes from Dr. Mark Levine.
Digger paraphrased Levine as saying he was supportive of the Copley effort, but advised caution in adopting the test more widely.
“This is an important strategy, and there will be a point during this unprecedented public health event when we will want to [know] if people interacted with the virus – whether they were aware of it or not,” he said in an email. “This would probably be in the deceleration phase of the virus in Vermont (which we have not yet reached).”
Levine said the state doesn’t yet have the testing materials to roll out serology testing for the population at large, nor does he have confidence in the accuracy of the tests. With serology tests, “there is a risk of false positives and false negatives which can lead to false reassurance or false alarming,” he argued.
I stopped there. If Levine didn’t have confidence in the tests and he understood that the risks of false positives and negatives, then why was he supportive? If Woodin tests one of his staff members and he gets a false positive (the person appears to have antibodies to Covid) that amounts to a get-out-of-jail-free card and the worker is free to go anywhere in the hospital…if the test is wrong, then that worker could turn a hospital into a nursing home: Joe Woodin could spawn his own personal Typhoid Mary. It would be difficult to get more irresponsible than that. There were more typical Digger machinations in the rest of the story. But I couldn’t get by the Levine quotes.
So, in a subsequent press conference I asked Levine about it—what did he think of the Woodin caper? Lo and behold, he was still supportive. I didn’t tape his answer, but I understood him to say he didn’t have a problem with the Copley move, it involved small numbers and we might learn something from it. OMG!
I then did what I usually do when confronted with something like this: I called around to some of the industrial strength docs that I have known for years, and they were amazed at Levine’s posture on Copley. “Bad idea” was the consensus. Those conversations were private, so I won’t name them here. But if my tiny corps is concerned that my view is not that of a doctor, which they should be, I offer this recent interview in the Washington Post with Eric Topol, a cardiologist and geneticist at the Scripps Translational Institute at LaJolla, Calif.
“The antibody test is challenging because there is (considerable) cross-reactivity between Covid-19 and four other coronaviruses, some of which cause common colds. Moreover, antibodies may or may not protect a person from spreading the virus or getting a second infection, and we have no idea how long they last.” Sounds like Topol and Levine read the prospects for the serology tests the same way.
It sounds to me as though Levine agrees on the science with Topol, and many others whose views flood the web. Which makes the Health Commissioner’s imprimatur questionable at best.
Phil Scott and his quarterback might think about that.

The Virus Papers, Part 4: Scott Administration Takes Aim at the Best Case Scenario

April 6, 2020 Laurie Davis

by Hamilton E. Davis

A kind of miasma is hanging over Vermont as this is being written on Sunday afternoon. We’ve been pretty much locked down for a couple of weeks now, which actually feels like a couple of months. Many of the lockees have little to do but stew about the coming surge, expected over the next couple of weeks, and worry on a longer reach about when we can get to a more normal place. A tsunami of information from the web is washing over us, but we somehow don’t feel that we know very much.

In fact, however, there is a lot of movement under the surface. One of the most important developments, entirely unremarked as far as I know, is that Vermont state government has embarked on an effort to move its virus management strategy closer to that elusive target—the best case scenario. The vehicle for that effort is something called “contact tracing,” which I described in an earlier Virus Paper as “tracking.” Contact tracing is the policy scalpel South Korea used to carve the virus right out of the guts of their country.

The idea is simple enough, although the execution is fraught. It works like this: when a person gets the virus you isolate and treat him or her. But then, you interview that patient to determine who he or she has been in contact with in the previous couple of weeks. Then you seek out and test each one of those contacts. If there are 15 and three of those tests positive—with or without symptoms—you isolate them and treat them till they test negative; meanwhile you interview the three positives to determine whether they have the virus and repeat the whole process.

Managing the virus across the state like this amounts to a huge effort, but it enabled China and South Korea to stop the beast in its tracks. China isn’t a model for us because it is an authoritarian country, but there is nothing to prevent Vermont from following the track laid down by South Korea. The Scott administration has produced a model of how it might work, and the potential benefit if it does, even partially:

The top line in red looks like Mt. Philo in Chittenden County, and it’s real scary—it blows right past our medical resources over the next two or three weeks, by a factor of four or five. The capacity in this view of the situation in this graph is shown by the horizontal line labeled 622. Fortunately, we’re not going there. The putative capacity is 622 beds and there are also caps on the available Intensive Care Units and ventilators; there has been some speculation that the latter two caps could be breached. The capacity numbers, however, have a fat margin of error because they do not include any of the resources available at Dartmouth-Hitchcock Medical Center (DH) in nearby New Hampshire. I’ll get to the DH in another Paper, but in normal times 40 percent of DH’s traffic comes from Vermont, and it is unlikely that DH’s management would ignore that…

In any event, the shallow green curve immediately below the horizontal is the track we are on now; it is the product of a function called an epidemiological curve, and it is dramatically different from the exponential curve that we have been riding on since early March. Over that three-week stretch, the number of confirmed cases were doubling every three days or so. I am working with Easton White, Ph.D, a researcher on biological monitoring at UVM, and White spotted the shift in function on March 27, when the doubling period itself doubled, from just under three days to just under six.

In Mathland, the early exponential track is well within the capacity of a high school student, but the epi curve is anything but. Even my tiny corps of brilliant readers will be forgiven from taking a pass on that; it will take the corps from high school math, a cinch for them, to the cold mists north of ordinary differential and integral calculus. I have looked at the generic epi formulas; and, trust me, one of those could wreck your whole day. Even the pros, like White and the team of experts now working for the state, aren’t running these calculations on the backs of envelopes—they are dumping their data into computer programs that can do things like evaluate an integral that would make your head hurt.

Anyway, it’s that middle curve that will control our lives until we get by the virus—specifically, it will tell us when it is safe to begin re-igniting our economy. At this point, the curve shows us getting close to normal by June. However:

It is absolutely critical to note that not a single point on the green curve is guaranteed past April 2, the day it was published. Vermont’s performance has been solidly within the relatively optimistic range, but that performance depends on continuing the rigorous passive defense we have mounted so far—shutting down human contact as far as possible, closing businesses, etc. If we take our collective foot off the brakes, however, there is nothing to prevent moving the green line in the wrong direction, to the unforgiving red slopes of Mt. Philo.

The sermon for today though is about a cautious reason for real optimism, the potential to move the what’s-actually-happening green line to the lower blue line, the best case scenario. The full potential of such a move can be seen in the numbers listed on the two lines. At the peak, the green curve shows us needing 521 hospital beds. The blue curve at the same time shows us needing just 170, a three-fold improvement. And the slope of the blue line moves asymptotically to normal quite rapidly. Just looking at that curve evokes for me the recent headline on a New York Times piece by Maureen Dowd, “Let’s ‘Kick Corona Virus’s Ass’.”

Can Vermont Actually Do That?

Well, the Scotties are taking a shot at it, to their great credit. The story of the American response to the virus is a chronicle of blundering and mismanagement, from the patent absurdities coming daily out of Washington to the buffoonish maunderings of the nitwit governor of Florida. So, Vermont is punching well over its weight on the Covid challenge, but that doesn’t guarantee anything—just escaping a train wreck will be hard enough.

In fact, I was flabbergasted that they are trying. I asked the Covid team about it in a recent press conference and I thought it was pretty much a throw-away question. I swim in the ocean of crap that floods the web every day and I had seen no sign of tracking in other states. But the Scott team jumped right on it.

“Yes,” said Health Commissioner Mark Levine, without hesitation. (paraphrasing slightly.) “We are working on it now.”

I asked the obvious questions—can you do enough testing, and do you have the people necessary to do the interviewing?

Levine didn’t say yes exactly to either one, but the replies amounted in my view to a real effort. The state has considerably more testing reagent than it had earlier, Levine said, which means that it can go well beyond the earlier constraints that led to testing only people who had all the symptoms. Okay, that’s good. How good? Good enough apparently to begin testing non-obvious people, based on the interviewing of people with confirmed cases. That allows the managers to get deep into the sizeable potential that exists in the whole population. How deep? Impossible to say, but it’s reasonable to expect some inflection of the green line in the direction of the blue.

In fact, a few days later came what looked like a spike—I think it was 70 some new cases in one day. That was almost certainly an artifact of increased testing, rather than a movement back toward exponential increase. And I found it noteworthy that the World Health Organization (WHO) had recommend a 90 percent cold rate for testing: If you test 100 people and get more than 10 positives you aren’t testing enough. My calculations are that in recent days, the Vermont rate has been right around 10 percent, pretty much on the WHO target. In any event, Levine sounded determined to ramp up testing significantly. The testing isn’t that hard, however; you just need reagent—testing kits in the earlier vernacular. But the second half of contact tracing seemed intractable to me—who would do all that seeking out of exposed individuals, the interviewing.

Levine didn’t even slow down for that. The work would be done by personnel from the Department of Public Safety, AKA the Vermont State Police. Levine, I think, said they had 40 cops ready to go. (You can’t easily check anything in Lockdown Land). OK, perfect. Crime and traffic should be down, and state cops could basically do what they always do—go out and talk to people and find stuff out. They can worry less about burglaries and guys testing out the Porsche at 140 on I-89 east of Brookfield, and more about who is walking around undetected infecting other Vermonters.

Will it work? Nobody can say for sure, including the Scotties team. But it’s a gutsy effort, and every Vermonter ought to wish them well. They deserve it. And every increment that the green line can be leveraged in the direction of the blue will redound to the benefit of the whole state.

I am recommending that every one of my tiny corps of brilliant readers go out on his or her front porch and launch a cheer into the clear air in favor of contact tracing. It’s the most hopeful tactic we have.

The Virus Papers, Part 3: Duck and Cover, or a Punch in the Nose

March 29, 2020 Laurie Davis

by Hamilton Davis

It’s a bit embarrassing to admit that I had trouble taking seriously some of the injunctions from experts about how to cope with the virus. Don’t get close to people and sneeze virus droplets all over them! I was okay with that—made perfect sense. What frankly didn’t make sense to me was the constant yammering about washing your hands. Of course, people need to wash their hands, as well as brush their teeth, and change their sheets every couple of months. But this Covid beast has driven the whole world to its collective knees, and you’re telling me we can stop it with hand washing. Really?

It evoked for me the early 1950s, when elementary school teachers all over the country were drilling their second, third and fourth graders to “duck and cover, ” to dive under their little wooden desks and hold their heads to protect themselves against an atomic bomb attack. I was in high school in the early 1950s, and I have no memory of that particular idiocy at all—any high school teacher who tried it would have sacrificed any credibility he or she had.

But those little kids were hitting the deck on every signal. The one enduring lesson they might have taken away would have been an early appreciation of how ridiculous adults could be if they were terrified of the trip to instant oblivion promised by a nuclear war between the U.S. and the Soviet Union.

Anyway, I sort of washed my hands a little more than usual, although I could never get into any of the singing songs as a mnemonic for how long the process should take; and I never even considered stuff like training myself not to touch my face, which some serious people I knew were doing. What the hell, I thought, maybe if I get it I’ll survive it…

This minor league irresponsibility lasted until a week or so ago, when I read an amazing piece in the London Review of Books, one of my favorite sources of very high quality, idiosyncratic journalism, for which the Brits are justifiably famous. The Brits can really write, like the French can really cook. The author of this essay enabled me to actually envision the virus as a perfectly familiar archetype, the schoolyard bully, big, strong, nasty and potentially dangerous, but with real weaknesses. The best way for ordinary kids to survive the schoolyard is to understand weaknesses.

The essay was written by Rupert Beale, a researcher at the spectacularly-credentialed Francis Crick Institute in London. Beale’s specialty is teasing out the pathways by which viruses, particularly corona viruses, invade and take over mammal cells. So the Covid-19 beast looming over us now is right in his wheelhouse. Much of the piece is a fast-paced overview of the current world state of the Covid battle, coupled with a pretty dense primer on the biology and genetics of viruses. Beale doesn’t dumb down the science, and even though he is as good writer on the subject as you are likely to find, it’s easy to get lost in the interplay of DNA and RNA molecules in the dance. In fact, your faithful correspondent was a wallflower at that dance, and a quick Googlized tour through the genetics didn’t help much. Those of my tiny corps who lack background in propeller-head biology and genetics will have to invest an afternoon to figure it out.

What did jump out at me and set me off on my schoolyard metaphor was Beale’s description of the virus itself, with a focus on its size. He introduces his piece by recounting his introduction to coronaviruses 20 years ago. Coronaviruses are RNA viruses.

“Their special cunning” Beale writes, “is in the huge length of their RNA genome. RNA is much less stable than DNA, so RNA viruses tend to be short. We measure them approximately in kilobases (kb) of information. Polio is a mere 7 kb, influenza stacks up at 14, (Covid-1) is 30 kb.” That is close to the limit of information for RNA, he adds, “about as long as a strand of RNA can be without collapsing.” Okay, so there we have really big size, but I am reading “close to collapse” as weakness.

Beale confirms that toward the end of the piece.

“For all its huge genome and clever tricks,” Beale writes, “(COVID-19) has significant vulnerabilities. It has a fairly feeble fatty envelope, which it needs to sneak into cells.” Then Beale came right at me:

That’s destroyed by soap, and by alcohol—so washing your hands carefully or smearing them in alcohol hand gel will kill the virus…expect to be bored to tears over the coming months by pious injunctions to wash your hands. It doesn’t seem like much, but it’s going to reduce the risk at least somewhat.

OMG! Who knew? We’re going to have to learn to love pious injunctions. As an aid, I am choosing to think of hand washing as a punch in the bully’s “fairly feeble fatty” nose, the last resort for an ordinary kid when the big guy’s got his mitts on you.

If that new mindset doesn’t work for you, however, Beale offers you a second mental refuge. Here it is, in full:

The second great vulnerability of the virus is that it has to take great pains copying its genome. All RNA viruses (influenza, for example) have a special enzyme that copies RNA into RNA. These RNA-dependent RNA polymerases are usually very sloppy copyists. They don’t bother with proofreading, and make huge numbers of errors. This high mutation rate enables them to evolve very rapidly; that’s one reason we need a new flu vaccine every year. Coronaviruses (one type of RNA virus) have to be much more careful, or else their huge genome will accumulate too many errors. Their mutation rate is therefore lower, so we may be to develop a fairly effective vaccine—though it will take a year or two, assuming it’s possible at all.

I read that last sentence as a marginally hopeful augury—its huge size reduces its mutability. But as for the rest of it, I have no clue at all. If any of my tiny corps of brilliant readers can render it in English, send it to me. I’ll share it with the rest of the corps. We could even send it to Phil Scott and his friends and the denizens of the Legislature.

The Virus Papers, Part 2: Is the Best Offense a Good Defense?

March 26, 2020 Laurie Davis

by Hamilton E. Davis

Things to cogitate on in Green Mountain Lockdown: none of us has ever experienced anything like this before, and it’s interesting to wonder what we will learn from it, as individuals and as a society. Some lessons are obvious already—it’s sub-optimal for example to have a venal and incompetent national government; and it’s likely that we won’t soon forget that it was unwise for federal officials (not the Trumpies) to forget to restock the national supply of surgical masks. Yet, the ambition and reach of the current virus is taking us to places we’ve never been before.

One of the most important things we all have to figure out is the extent to which we can depend on a passive defense against a dangerous virus. The two countries that hammered the beast into submission in a relatively short time were China and South Korea. They did so using two basic tools—virtually unlimited testing, and aggressive tracking. The formula: test everybody you possibly can. When you find an infected person, isolate him or her, and then interview that person to find out others with whom the infectee has been in contact. Then test those people and carry out the drill all over again. What it amounts to is chasing down every edition of the virus and starving it of new hosts. That is an active defense.

It will be argued, of course, that China cannot be a model for the United States because of its brutal social and political control, and its indifference to suffering on the part of its people. South Korea, however, is a democratic society, and the active defense there seems to have worked. At a minimum, the South Koreans flattened the virus curve far better than any western country, including Italy, Germany, the UK and the United States. Could we emulate the South Koreans?

There is certainly no intrinsic barrier to getting enough testing material. Our failure to accomplish that was simple incompetence, which can be corrected. We will pass at least two generations before we make an error that stupid again. A much harder question is actively tracking each individual virus through the population. We would have to do so without sacrificing individual liberties; and even assuming we could devise an acceptable algorithm in that regard, it is hard to imagine the human tracking machinery necessary to follow the winding path each individual virus takes through a population of more than 300 million people.

Still, it shouldn’t be impossible. And for those who would bemoan its cost and complexity, I would suggest: Take a look around. The virus has blown our economy to smithereens. We’re all sitting around in lock-down, our businesses, our educations, our lives on hold. Those of us not on lock-down are tearing around trying to keep us alive and risking their health in the process. The total cost is already in the trillions of dollars, and we haven’t hit bottom yet, the narcissistic fantasies of Donald Trump to the contrary notwithstanding.

The other side of that conundrum is the final accounting we will have to make of the efficacy of our passive defense. We have implemented what feels like draconian steps to limit individual contact and hence the speed of virus movement through the population. It is a serious question whether those steps were taken soon enough, but they are clearly here now—there’s no evidence yet, however, that they have shifted the doubling curve. In my first Virus paper, I showed the raw data for the increase in infected patients, starting with the first couple of cases and topping out at 75. When plotted on a graph, the trajectory was exponential, which means that the numbers were doubling over some period—a day, two days, three days, a week…when those data were graphed by the logarithms of the raw data, they fell into a straight line on a doubling rate of three days. Easton White, a research associate at the University of Vermont has updated the graph of the raw data, and logarithmic treatment that shows the doubling interval.

The number of Vermont cases as of Thursday morning was 123, which is still roughly on the three-day trend, so there is not as yet any indication that our passive defenses have bent the curve downward.

A significant problem with these data is that there is no way to tell whether the daily progression of the numbers is being driven by the testing pattern, or by the increase in the absolute number of cases—or both. In Mathland, the problem is there is no “counterfactual,” which means that we have no way to tell what the rate of increase would be if we weren’t reacting to the virus at all. Italy has sent a strong message that we would be much worse off, but “worse” is not a number.

In the last 24 hours, Gov. Andrew Cuomo of New York has said he thinks that the rate of increase of new cases in his state, principally in New York City, is easing a little, which could imply that the passive defenses are beginning to bite. But it is too early to draw any firm conclusions on that yet. In Vermont, we’re still exponential. The first optimistic sign here will be a marked increase in the doubling period, to, say, a week or more. But even there, it will take some time to wash out the counterfactual problem.

When the waters finally recede, we will be able to tote up the cost and efficacy of the passive defense. We can consider then whether we should build an active defense capability, which will be a fascinating policy discussion, in Vermont and the rest of the country. Think about it, for most of us there’s not much else to do.

The Virus Papers, Part 1: The Coming Surge is Just Too Big

March 24, 2020 Laurie Davis

by Hamilton E. Davis

The assault on our species by the COVID-19 virus has inspired me to wonder about how my tiny corps of brilliant readers is coping with it, now that its full impact looms over our Green Mountain fastness. I don’t remember how or when I came up with the tiny corps formulation; it seemed at the time like a harmless, tongue-in-cheek acknowledgement that my audience is small. The more I have used it, however, the more it has struck me that my tiny corps isn’t really tongue-in-cheek anymore—it’s still tiny but I’ve come to believe the “brilliant” part. The reaction I get from my readers tells me that they really appreciate efforts at serious journalism. And I suspect that that hunger is the stronger because serious journalism is hard to get, especially in Vermont. Hence, a new formulation—The Virus Papers.

The fact that the flow of information to the public amounted to pretty thin gruel struck me a week or two ago, and it wasn’t limited to Vermont. I kept reading, in places like the New York Times and Wall Street Journal as well as the usual web suspects, that there “weren’t enough test kits” to determine who had the virus and who didn’t. For several days, it seemed like it was “test kits, test kits, test kits” all the time, set in a context that included huge failures by the Trump administration, turf wars between the Centers for Disease Control and the Federal Trade Commission and a surfeit of political back-and-forth between Democrats and Republicans. It wasn’t difficult to follow the national trends, or the political thrust and parry in Washington, but I was particularly anxious to figure out just where we were in Vermont.

Where are we on March 24?

As far as Vermont was concerned, I began looking for what seemed to me would be the basic information you would need to figure out what was going on. How many staffed hospital beds do we have? How many ICUs, because the virus attacks the lungs? How many ventilators, for the same reason? And when you mush all of that together, how many beds do we have for very sick people?

Beyond that, what would the experience of other countries, as well as other states in the United States, tell us about what we could expect in Vermont? And still further beyond, what could we do in Vermont to deflect the beast?

Until about the middle of last week, it seemed very hard to get what I think is basic information about our armamentarium, number of beds, etc. Governor Phil Scott and other officials were urging people to keep a distance between individuals, avoid crowds, wash their hands. Schools and colleges were sending students home, restaurants and other gathering places were shutting down. But the virus was continuing to build and I still couldn’t get the basics.

At that point, however, things started to move. Scott held a news conference that I called into and in the wake of the governor’s remarks, Mike Smith, the Secretary of Human Services began answering pointed questions from the press. Like, how many ventilators do we have? Smith just answered it, around 210, which answered one of my questions—would state officials avoid specifics in an effort to avoid scaring the public. Nope, the number was 210, with no sugar coating, even though that number was far below what any surge number of cases would require. The Seven Days weekly magazine carried some of the specifics, albeit without much context; but on Sunday, Mar. 22, VTDigger cobbled together the best picture yet available on what we have available medically to deal with the expected surge of patients over the next few weeks.

It looks like this:

961 total hospital beds, 99 intensive care unit (ICU) beds, 210 ventilators

That is the baseline of the capacity that exists in the state. A key question is what percentage of those beds would be available for virus patients. Hospitals can postpone stuff like elective surgery, but they will have to continue to care for patients coming in with routine medical problems—heart attacks, strokes, cancer care, accident victims, and so forth. In a recent press conference, Mike Smith, Secretary of Human Services, said that number was 500 beds. Hospital managers have been planning to open up new spaces for virus beds, but it isn’t clear how much that will help: the ceiling is more the equipment available, like ventilators, and even more importantly the people to deliver the care.

When you start to put together all the available information it quickly becomes clear that Vermont can’t handle a surge of cases that is not just likely, but virtually certain. Jeff Tieman, the president and CEO of the Vermont hospital association, put it succinctly:

It is literally not possible to be ready for something at the level we’re facing right now.

So, what do we know about the virus at this point, and can we foresee when the growth in the number of infected patients will exceed the capacity of our health care system? In looking at this question, I am working with Easton White, Ph.D., a research associate at the University of Vermont. White is a biological modeler whose research specialty is quantifying how populations change over time, including examining the movement of disease through animal groups. “Working with” means I ask him questions and he figures out the answers.

As of the end of the day Monday, March 23, the number of infected Vermonters stood at 75. The first Vermont case was reported in early March. The raw data looks like this:

Raw Data

Date Cases

2020-03-16 12

2020-03-17 12

2020-03-18 18

2020-03-19 22

2020-03-20 29

2020-03-21 29

2020-03-22 52

2020-03-23 75

When you graph that, it falls into the classic mathematical pattern of exponential increase. Exponential increase means simply that the rate of growth is proportional to the population size. If you start with 2-squared, for example, you get 4, 8, 16, 32, 64, 128…an exponential track starts out looking not-too-bad and then goes up really fast after you get out a ways. Here is a graph showing the track of the Vermont data from the table above. It’s exponential, like most if not all of the United States, and the worst-hit countries in other parts of the world.

A critical question in trying to suss out the impact of the virus trend on Vermont is to determine the doubling interval, the time it takes for the number of cases to double. The longer you can stretch out the doubling interval the better chance the medical system has to deal with the patient load without crashing. The way you get at the doubling interval is to express the raw data in logarithmic form, which converts the track of the raw data to a straight line, whose slope can be measured, and the slope is used to find the doubling interval. Hence:

White’s calculations show that the Vermont doubling period is every three days. If we stay on our current track the number of virus victims in the state will blow by Vermont’s hospital capacity sometime in the second week in April. Can that crux point be stretched out, or even suppressed enough that the health care capacity never gets breached?

The Digger story wanders around quite a bit but read all the quotes: what all those professionals are saying amounts to—we hope so, but we have no idea how. And the few I have talked to believe the chances are slim to none. We all have to be prepared psychologically for the doubters to be right.

N.B. I’ll post some further editions of the Virus Papers over the next few weeks. Coming tomorrow—why we can’t match Korea.

In Digger’s Health Care Reform, No Good Deed Goes Unpunished

February 18, 2020 Laurie Davis

by Hamilton E. Davis

In his January 24 budget address, Gov. Phil Scott took one of his most significant steps in support of the Vermont health care reform project since he took office in 2016. Scott said in his speech he was confident about moving ahead with the project based on reports showing that the state’s hospitals had spent well under the contracted level for 2018 for a piece of the Medicaid population. The providers working under the terms of fixed price contracts performed markedly better than those hospitals and doctors did in the fee-for-service reimbursement system in the past. Every word in Scott’s statement was true, including the punctuation. VTDigger’s response was to call him a liar.

Digger didn’t use the word liar. Its report said the Scott statement was “Mostly false.” And you can’t check that out because Digger took its report down after three or four hours and replaced it the next day with a new claim that the Scott statement was only half false. What are we to make of this mess?

The first thing to understand is that the Digger reporting is just as bad now, or worse, than it has been since it began its newest phase last October. It is also becoming clear that Digger is determined to remain on its current course in reporting on the health care reform project. What is new in the last week or so is that Digger now has an association with PolitiFact, a national organization whose mission is to test the veracity of statements by politicians and public officials. The Digger article is cast within the PolitiFact framework that establishes five categories—True, Mostly True, Half True, Mostly False, False and Pants-on-Fire. You have to wonder about PolitiFact’s due diligence taking Digger into its tent, but that’s a story for another time. Anyway, let’s look first at the Scott move.

The Significance of the Scott Move

The Governor said that in 2018 providers working under fixed price contracts spent $7.7 million less than they would have if they had been paid under the fee-for-service system that had been in effect previously. The same under-spend showed up on a much smaller scale in 2017, the pilot year of the reform effort. Scott also said the 2019 figures, which are not yet fully available, are trending in the same direction.

“The challenge,” the Governor said, “is changing the way we pay for something that is 20 percent of our state’s economy without making it harder to access care, adding new costs or reducing quality. For these reasons, many Vermonters are skeptical,” he continued. “I know I was—and still am, somewhat, because we’ve seen firsthand that there’s no quick fix or political promise to make healthcare more affordable. But the early results give me reason to be cautiously optimistic.”

The Governor didn’t provide much context, and I’m not sure whether he could have without turning a couple dozen sentences into a health policy seminar, which would have taken up the whole budget address and probably several other addresses as well. So, here is what I believe my tiny corps of brilliant readers need to know: the dynamic he was welcoming was limited to the Medicaid population in the state; Medicaid is the only payer now prepared to take advantage of fixed price contracts. Medicare is not there yet, and neither is the private insurance industry, although Vermont Blue Cross is discussing it with OneCare Vermont.

The fixed price contract for Medicaid in 2018 was set at $75 million, and the actual spending was $67.3 million, $7.7 million under that. That number is known because both payers and OneCare Vermont are keeping records of what the fee-for-service payments would have been under the old system—shadow payments is the buzz phrase. The state didn’t save the $7.7 and Scott never said it did.

The significance in the finding lies in the prospect that future fixed price contracts can come in at savings of 10 to 11 percent, or more, less than fee for service. That savings can amount to several hundred million dollars a year. And that is just a start. Extending the new payment model to Medicare and the private insurance system would save Vermonters billions of dollars out into the future and would constitute the first sustainable delivery system in the United States.

The barriers still to be overcome, however, are formidable. That fact is what lends added significance to the Scott comments in his budget address. When Scott took office in 2017, he treated health reform like a ticking bomb; it had cost his predecessor, Pete Shumlin, his promising political career and Scott wanted no part of it. Within a year, however, Scott had come to believe that reform could work and he began to lend his support. But quiet support is not the same as political leadership, so it was important that the Governor stepped out from behind the curtain.

The importance of that cannot be overstated. The progress of reform has been strikingly good, given the intrinsic difficulty of the task. But the political environment has been toxic, with powerful opposition from many quarters, most notably the Vermont Senate; and the opposition has been amplified by the coverage from VTDigger, Vermont’s only active daily press organ.

Fact Checking Digger’s Performance on the Scott Statement

Is Scott a Liar, Half a Liar or an Innocent Victim?

The central issue in the Digger coverage was reporter Katie Jickling’s claim that Scott had falsely told the public that OneCare Vermont had saved the state $7.7 million in health care costs in 2018. That was the claim in the first Digger story on the Scott budget address. That story went up sometime during the day Sunday, Feb. 2. By the end of the Super Bowl game, it was gone, only to appear in rewritten form on Monday afternoon. The judgment in the PolitiFact lexicon had changed from “Mostly false” to “half true.”

In an editor’s note, Digger said that its previous article had been revised after the governor’s office had reached out “clarifying his statement as focusing on the Medicaid patient pool. This made the statement more accurate—we changed the ruling from mostly false to half true—but Scott still left out important context about overall costs associated with the One Care program.”

In the recast piece, Jickling picked up the thread of Digger’s thinking: referring to the putative $7.7 million savings, she wrote, “That savings figure jumped out at us,” she wrote. “Our research on OneCare has found mixed results—and an open admission from health care officials that the program has not yet created the savings they hope to achieve, Did we miss something?”

Did they ever! The whole mess is a tissue of mistakes, sleazy writing, and deliberate misinformation. Too extreme? Here are the facts:

The whole modern reform movement in the United States, under the general rubric of “Obamacare,” was launched in 2010 with a clearly defined track. There was a sort of warmup period from 2013 to 2016. In 2017, ACOs like OneCare would be allowed to pilot new reimbursement systems, with the first fully operational year coming in 2018. The target results were supposed to be achieved by 2022—a five-year span. Given that reality, let’s consider the Digger claim that OneCare hasn’t achieved the results it had hoped for. Keep in mind that that under federal law the first full reform year was 2018. The Digger claim here is pure garbage.

The fact is that no one knows what the performance track is because it is impossible to tell that from one year’s results. No one will know even the most preliminary results until we see the 2019 results, and they aren’t available yet. Even then, it will be difficult to project what is likely to happen in 2020, 2021 and 2022. And what really indicts the quality of the reporting here is the statement that it’s based on “an open admission” from health care officials.

There was no such “admission”—everybody involved in the reform project has been bending over backwards not to claim more than can be fully justified. The so called “admissions” were simple statements of fact, and describing them as admissions is just sleazy writing. Moreover, the results so far, while less than fully proving the validity of the reform concept, have been good, not bad. The system performance on Medicaid was positive in 2017, and even better and more encouraging in 2018. We don’t have the 2019 results, but Scott has access to the figures for most of that year, and he said they look good too.

What’s left of the Digger judgement is that Scott did not include the administrative cost of OneCare in the savings figure of $7.7 million dollars, and that he had implied that the Medicaid performance also covered the performance of the other contracts, the ones with Medicare and the insurance carriers. The whole admin cost stuff is just silly, and not worth time. The issue of whether Scott was clear about the scope of the performance, however, is clearly substantive, although basing a half-true rating on that alone seems overdone. For me, the more interesting element there is what it reveals about the Digger style, as well as its editing performance.

The whole piece is predicated on the call that a Scott spokesman made to Digger in the wake of the first, erroneous piece, the one that got taken down on Sunday night and rewritten. The spokesman “reached out with additional information clarifying his statement as focusing on the Medicaid patient pool.” That sounds both reasonable and innocuous. Based on my 60 years in the journalism and policy world, I would urge my tiny corps to look behind to see the real weaseling by Digger.

Jickling’s reporting was based on an interview with Ena Backus and Alicia Cooper of the Agency of Human Services staff weeks before the two stories went up. Backus and Cooper are seriously credentialed specialists in the health policy biz. Backus has a masters degree from Brandeis University, and Cooper has a Ph.D in health policy research from Brown. No serious person could talk to those people without learning that the 2018 results were from Medicaid only, not Medicare or Blue Cross. Nor that the results were encouraging, without being fully dispositive. The reason I know that is because I talk to them about the same stuff myself, and that’s what they told me.

What obviously happened here is that once the Diggers figured out that they were turning a guy who hadn’t spoken a single false word into a liar, they realized they had to climb off their original judgment and try to cobble together enough other stuff to avoid total embarrassment by calling him only half a liar…After all, it was Digger’s maiden voyage on the good ship PolitiFact.

Sound too contentious? Possibly. If so, my tiny corps should suspend their own judgment on their faithful correspondent. My next post will demonstrate an even worse performance by Digger, one that poses a threat to the whole reform process itself.

Health Reform: The Summit is in Sight

February 5, 2020 Laurie Davis

by Hamilton E. Davis

It was about this time of year in 2011 when Vermont’s health care reform project was born. The Harvard professor William Hsaio was ready to bring his plan for a radical new delivery system into the Legislature. The plan had been commissioned in the final years of the Douglas administration, but a new governor, Peter Shumlin, had been elected the previous November. Hopes were high for the Hsaio plan because it was a so-called Single Payer proposal, and Shumlin had won both a difficult primary election and a very close general on the strength of his support for exactly such a policy.

However, the Hsaio plan died a quick death, and Shumlin turned the problem over to a new architect, Anya Rader Wallack, and a new political manager, the former lobbyist Steve Kimbell. Working with the Legislature, the Shumlin team came up with a new plan that passed quite easily given its far-reaching significance, and went into effect on July 1 of that year.

At the time, I wrote an analysis for VTDigger suggesting that the Shumlin reform effort could succeed, but that it would have to travel a very long road to get there. In fact, the road has been longer than I expected, and far more difficult than I anticipated. Yet, here we are—close to a financially and medically sustainable reform system. We can now see what such a system looks like but getting there will be very hard. We will begin to see just how hard by the legislative crossover deadline in early March. Over the last couple of weeks, the reform technocrats have been trekking up to the state house to tell legislators where they think we are and where reform is headed. I have very little confidence in that process, partly because after watching it for the last eight years I have seen no evidence that the Legislature understands health care at all; and further, because the press, a.k.a VTDigger, has done a terrible job writing about it, a view I have already expressed at length. In any event, herewith my take on the reform effort:

What has Reform Accomplished So Far?

The reform effort has done two critical things so far. The first is that it has effectively cut annual inflation in the 14-hospital Vermont delivery systems in half. The graph below shows that progress. The graph shows an inflation rate of 8.0 percent over the period 2001 to 2009. I call the rate in 2010, 2011 and 2012 the anomaly period; the drop in 2010 was clearly caused by a drop in demand flowing from the 2008 financial crash, and the 2011 and 2012 rates were set by the Legislature as part of the transition to the establishment of the Green Mountain Care Board.

The important number today is an inflation rate of 3.9% from 2013 to the current year. Those gains resulted almost entirely from conventional downward regulatory pressure on hospital spending, although the situation among the small hospitals is unsettled, about which more later. The second major accomplishment of the project is the establishment of OneCare Vermont, the consortium of doctors and hospitals whose purpose is to allow those providers to deliver a full range of care to large cohorts of Vermonters for a fixed price. The key words there are fixed price.

The consensus in the health policy community is that changing how doctors and hospitals get paid is the key to moving health care costs from super-heated inflation that took health spending from 6.6 percent of the U.S. Gross National Product in 1966 to more than three times that today. The fee-for-service engine that has driven spending has to be changed. The knotty question at the heart of health reform is—how?

What’s Going on with OneCare?

No single entity has been more vilified over the course of the reform gauntlet than OneCare Vermont, the state’s single Accountable Care Organization. The only possible exception is the University of Vermont’s health network; and, in fact they should probably be considered together, because much of the opprobrium that flows over OneCare is really aimed at UVM, which is a co-owner. The result is that neither the public nor the legislature have been able to get a fix on it. So, the basic questions:

What exactly is an ACO, and what good is it? An ACO is simply a corporate structure, roughly akin to a cooperative or coalition, that allows a group of doctors and hospitals to provide necessary care to a big bunch of patients for a single price. Consider Sally Smithers, who might live in Swanton. If she has a medical problem, she could go to her primary care doctor, who might solve the problem. If not, the doctor could send her to the community hospital in St. Albans, and if the doctors there couldn’t fix it, they could send her to to UVM Medical Center, or to Dartmouth-Hitchcock, or both, or somewhere else. In fact, patients pinball through the system like that all the time. The ACO simply draws a line around all those hospitals, and establishes a single price for the care they provide. At the same time, it encourages the elements in the system to work together to solve the basic problem—returning Sally Smithers to full health. We need the ACO to accomplish the Vermont reform plan, which gets patients like Sally back to health more efficiently medically, and at a price we can afford.
But why is OneCare, our ACO, doing so badly? It isn’t doing badly; it’s doing just fine. In fact, basically every important piece of data bearing on its performance has been positive. To pick just one: The OneCare budget for 2020 showed that in 2018, just eight percent of the enrolled Medicaid patients were in fixed price contracts, as opposed to the much softer cap of the group cost targets covering the remainder of the Medicaid population. The naysayers and reform opponents jumped all over that—a clear portent of failure they said. But then the 2020 figures came out, and they showed a 10-fold increase, from eight percent to 88 percent. Another positive metric: Vermont Blue Cross, which either insures or manages the health insurance for just north of 200,000 residents, announced recently that they would attribute all of their patients to OneCare. That cohort is not yet enrolled in fixed price contracts, but that’s where they are headed.

Finally, one of the most important metrics ever has just become available. The Medicaid figures for 2018 showed that the fixed price component of spending for that year was set by contract on Jan. 1 of that year at $67,254,681. Facing that discipline, the state’s hospitals and some independent physicians brought that cohort in at $59,591,372, which is $7.7 million below what was expected. The significance of that number demonstrates the potential for fixed price contracting to save real money—the percentage under was 11.5 percent—across the single most important sector of heath system costs. This is a very complex subject, which I will get into more fully in my next post, but it is striking how much is going right with reform now.

I don’t wish to seem Pollyanna-ish about this; there some issues out there, like the total number of Vermonters enrolled across all payers, which is not yet up to scale, but that challenge is manageable. The fact is that OneCare is now fully in place and operational, and while it is not perfect, it is going as well as the other major players, like the Green Mountain Care Board and the Scott administration. Those three pieces of governmental machinery are not obviously parallel things, but they all have to play well and play together to accomplish the reform goal.

As I said at the outset, however, the easy money has already been made. Getting the system fully sustainable will be far more difficult. The last 15 percent of a very heavy lift like health care reform is always the hardest, and so it will be here. And none of the players is really ready for the final push yet. My tiny corps of brilliant readers will note that I haven’t described what the final push will look like, but it is coming—soon.

The Daily Miracle: A Memoir of Newspapering

February 4, 2020 Laurie Davis

by Hamilton E. Davis

My tiny corps of brilliant readers may have noticed over the last couple of years a recurrent theme in this space: the proposition that the collapse of the American newspaper has been a major factor in the degradation of our political life and its attendant cultural and social damage. I believe that Donald Trump could not have survived the scrutiny he would have received by the press in the 1960s to 1990s era; I also believe that the Republican Party would still be worthy of respect by the center and the left, not to mention the intellectually honest remnant of the right.

The shadows are lengthening now on the generations of Americans who grew up in the last half of the 20th Century, in an environment illuminated by serious, professional press coverage. In every region of the country, indeed most states, residents could pick up on their doorsteps every day, and often twice a day, newspapers that provided information they needed to order their political and social lives. Those papers were indeed a miracle; they weren’t perfect, but they were a thousand times better than the smoking relics in the rubblefield that exists today.

I grew up in that era and found my life’s work there. The core of my experience was the 10 years I spent at the Providence Journal in the 1960s and early 1970s, writing about government and politics, first in Rhode Island and eastern Massachusetts, then in Washington. One of my best friends and valued colleagues there was a guy named Fraser Smith, a superb writer and reporter, who had one of the great gifts of the journalism trade—compression. I taught writing and public policy for a time to graduate students at UVM, and I always had them read a story of Smith’s about a working class bar in a rundown section of Providence, 800 words that limned a time and a culture, with more sheer hitting power than you could find in a backpack full of sociology texts.

That story was written sometime in the late 1960s, and at that time you could find comparable work in dozens of American newspapers, whose names ring like tocsins now that they are mostly smouldering hulks—the Philadelphia Inquirer, The Miami Herald, the Baltimore Sun, The Atlanta Constitution, the Louisville Courier-Journal, the Cleveland Plain Dealer, the St. Louis Post-Dispatch, the Milwaukee Journal, the Minneapolis Tribune, the Chicago Tribune and Daily News, the Arkansas Gazette…

Fraser Smith is retired now, but he has written a memoir that provides a glimpse of the newspaper world of that era, a shaft of light that illuminates a world that is gone forever. The title is The Daily Miracle: A Memoir of Newspapering, and the author’s full name is C. Fraser Smith. It recounts his life in the trade, first with the Jersey Journal, then The Providence Journal, and, finally, The Baltimore Sun.

Much of this inevitably covers a work-a-day world, but Smith’s book captures, better than I have ever read, the ethos of journalism in those days: an absolutely fierce determination to get it right, and get to the bedrock truth at whatever effort it took. Smith gets at that in the final sentence of his Introduction: “The world needed to know what we knew.”

So, I am commending this book to my tiny corps. Because Smith speaks for me, too. The reason I do the work I do is because I believe people today often have no other way to learn the truth about the issues I focus on.

If my readers are interested, they can find copies of Smith’s memoir at Bear Pond Books in Montpelier.

New Sheriff Blunders into the Old Weeds

January 17, 2020 Laurie Davis

by Hamilton E. Davis

Mike Smith, the new Secretary of the Vermont Agency of Human Services, weighed in last week for the first time on the issue of health care reform in the state, and signed right on to the whole bogus narrative that the University of Vermont is an evil empire and that OneCare Vermont, the state’s ACO, is a rogue that needs to be reined in and made “more accountable to the people of Vermont.” Ok, in his testimony to the legislative committee, he didn’t actually say that UVM is an evil Empire, but UVM is the founder and co-owner of OneCare and any of the reform players who live outside of a cave understands that the real target of the attacks on OneCare is the UVM health network.

The Smith performance was particularly dispiriting because the new Secretary, who took the job in November, had sounded a new note in the somnolent Scott administration: faced, for example, with the findings of the Seven Days investigation into the disgraceful Department of Corrections operation of the women’s prison in Chittenden County, Smith reacted instantly—the situation is unacceptable, he said, and he would fix it. Which he promptly began to do.

It was also striking how quickly he called out the management of the Brattleboro Retreat for its manipulative ploy of threatening to close if it didn’t get another bundle of cash from the state.

I thought, maybe there’s a new sheriff in town, a welcome development in the health reform saga after five years of political leadership that varied between ignorance, stupidity and outright prevarication, the whole toxic stew amplified by biased press coverage.

So, it came as a shock to me, and to many of the health care players, that Smith took the position that OneCare needs to be forced to be more accountable to the people of Vermont for its activities; that he, Smith, is insisting that OneCare shift to non-profit status; that OneCare must meet that “condition” in order to qualify for a $5.7 million contribution from state government. If OneCare can’t legally become a non-profit, then the condition is that it act like one, which means disclosing the salaries of its senior executives.

What was Wrong with Smith’s Testimony?

Let’s count the ways:

The whole subject of non-profit status has no substantive importance. It has political importance, but that arises from a palpably false narrative. OneCare was incorporated in 2012 and has submitted tax returns to the IRS for the years 2013-2018. In none of those years did it earn any profit or suffer any loss. Pretty unusual, eh? A for-profit company operates for seven years and never makes or loses as much as a dime. Not for OneCare it isn’t. OneCare’s business has nothing to do with either profit or loss. And,
Even if it did earn a profit, the law requires that a for-profit, wholly-owned subsidiary of non-profit owners must return that profit to its non-profit owners. Which means that the money can only be spent for non-profit purposes. In sum, for-profit status means nothing. The bogus narrative wants you to think that OneCare wants to make profit so that it can have a party.
The reason why UVM and Dartmouth incorporated OneCare as a for-profit entity was the Vermont law that stipulates that no more than half the members of the Board of a non-profit can be potential beneficiaries of the business. In the case of OneCare, the Board includes representatives of the participating hospitals. Keep in mind that all the hospitals in the state are non-profit. But those hospitals can be beneficiaries of the OneCare operation, which doesn’t mean that they can have a party either, since they are all non-profit. And the inclusive Board structure is necessary to spread power and influence across all the hospitals, not just the big ones.
The whole “accountability” thing is as much of a red herring as the “for profit” ploy. The Vermont hospitals, which constitute OneCare, operate under the most draconian regulation in the United States: the Green Mountain Care Board controls capital investment in the system, as well as every operational dime they spend, not to mention controlling the size of the bills they send to private insurers like Blue Cross and MVP. The Board also crawls over every nook and cranny of the OneCare budget; approval of the 2020 OneCare spending was accompanied by 25 conditions.
The result is that since 2013, the system, which includes the Board and OneCare, has saved Vermonters $2 billion. And while the Board supplies the regulatory muscle, it’s the hospitals that do the heavy lifting since they are the only ones that have a clue how to deliver health care. So, to whom does the Sheriff want OneCare to be more accountable—the Press, the Legislature, the public? Not one of those entities has the faintest idea how to improve the delivery of health care. Neither, apparently, does the Sheriff.
So, what about the $5.7 million that OneCare has requested from the state, and which Smith has said has to be conditioned on OneCare shifting to non-profit status. The first thing to note about it is that it’s budget dust—four tenths of one percent of the overall budget. A second thing to note is that the money doesn’t stay in OneCare; it gets transferred to either member hospitals, or to local communities who have asked for help in improving the health of their residents.

A quick overview might help here:

Total OneCare budget: $1,424,600,000 (1.42 billion)

Pass through to pay for hospital care $1,381,600,000 ($1.38 billion) 97% of total

Pass through to hospitals and communities

to aid reform $43,116,066 ($43 million) 3% of total

So, what is important here? By far the most critical piece of the $43 million pass through bucket is the $22.7 million OneCare passes through to support primary care physicians—directly. That is composed of direct contributions to primary care doc salaries, as well as roughly equal payments to help with administrative work required when the doctor “attributes” patients to OneCare. The piece connects directly to the heart of health care cost containment because the payers can sign fixed price contracts with providers for care to those patients.

Those fixed price contracts put an effective cap on the amount paid to providers, so that hospitals cannot rev up their revenue by doing more care, than medically necessary.

The remaining $20 million is passed on to both hospitals and doctors for programs like Blueprint, SASH, support for mental health treatment and the like; and support to local communities for population health. If a town wants money so it can buy snowshoes for its library that can loaned to local residents, OneCare can make such a grant.

That is what OneCare does. It does not make or lose money. It doesn’t have to be bailed out. It hasn’t done anything wrong. There is nothing in the record to support the claim that OneCare is some kind of rogue that needs to be reined in.

What is Really Going on Here?

So, is Mike Smith really as much of an ignorant yahoo as he sounded in his first legislative outing on reform? I want to emphasize that what follows here is simply my view, which flows from 40 years of wandering around the health reform swamp. I specifically want to note that Smith has not told me what his views or his intentions are in that regard. Given this Caveat lector to my tiny corps of brilliant readers, here we go:

Smith is a very different kind of player in an administration that barely has a pulse on most issues, and basically no pulse at all on the health care reform. I strongly suspect that he apprehends the reality that the UVM health network is actually a critical prop for the Vermont economy directly and that the availability of a national class academic medical center in Burlington is one of the state’s most critical social and political assets. On the issue of attracting new people, the UVM system’s importance dwarfs that of the Scott administration program to offer $10,000 to people from downcountry move to rural areas here. What happens when they find out that the only way to communicate is by carrier pigeon, and the idea of kids isn’t that great because our rural schools are getting hollowed out?

At the same time, however, I believe Smith understands perfectly that the pervasive denigration campaign of the last five years has made UVM a pariah, and its OneCare progeny a whipping boy; and that the shrewd way to manage all that is to accept on the surface the proposition that OneCare has to clean up its act, and that he is the guy who can manage that and protect the public in the process. I suppose that could work, but I have two huge problems with it.

The first is that the public, and much of the Legislature, has been told so many lies about what is really going on that it might be impossible for reform to get the kind of public buy-in that a financial and cultural upheaval of this magnitude will need. For Smith to jump on board that bandwagon looks to me like a terrible error. The State of Vermont faces massive problems that threaten its future—its schools are being hollowed out; its agricultural economy needs to shift away from dairy; Lake Champlain is under siege; rural Vermont is dying…the most important bulwark against these legions is health care reform. The first phase of health care reform saved Vermonters $2 billion in five years and that is just the first phase. Getting the final steps in place could save enough money to salvage a state economy that is going nowhere fast.

The second problem with the putative Smith foray is that OneCare doesn’t need the money. As I showed earlier in this piece, the total non-direct care that flows through OneCare runs to some $43 million. By an order of magnitude, the most important piece of that is the $22 million that goes to support primary care doctors in the state. Everyone moans about the problems of providing primary care to the state—the whipping boy OneCare is the only player actually doing anything about it. And the actual source of the money isn’t the state of Vermont, it’s the hospitals, and by a huge margin, the biggest share of that money is contributed by the Evil Empire itself, the UVM system.

As I showed above, the remaining $21 million pays for a range of programs that aid community hospitals to cope with structural change and to local communities to improve the health of their people. I say that OneCare doesn’t need another five or six million dollars because the reform project is on the cusp of a shift to Phase Two, which can save more than Phase One, but which will be much more difficult to execute. The five million more dollars might be needed more then.

My brilliant readers will note immediately that I haven’t said what Phase Two is. I know, I know. Not quite ready for prime time, but close. The Sheriff will need to bring his game way up for that, in ways I suspect he doesn’t even realize yet. I think he will. For in a toxic environment where uncertainty is the coin of the realm, one of the few things I am sure of is this:

Smith came to play.

Be Wary of Digger Coverage on Health Reform

January 7, 2020 Laurie Davis

by Hamilton E. Davis

The Vermont health care reform project debuted in July of 2011, and has moved steadily forward since. The Vermont reform is the most advanced in the U.S., but it has never been adequately understood, and it has had to overcome a constant drumbeat of opposition—from elements of the legislature, from the Health Care Advocate, from much of the primary care community, from some of the community hospitals, from the social services community, from the political left and the political right.

The single most critical element of the opposition, however, has come from the “press,” and in Vermont today, the press is VTDigger, the web newspaper founded in 2009 by Anne Galloway, a former copy editor for the Barre Times Argus. From a standing start, Galloway built one of the most important new news organizations to arise out of the rubble field of American journalism. She started almost by herself, a slight figure striding rapidly all over the Vermont State House, camera in hand, when the Legislature was in session. Writing story after story, raising the money herself, doing prodigies of work. Her web site today lists a newsroom of 21, including 16 who write stories. It also includes Glenn Russell, the best Vermont news photographer of the modern era; Jim Welch a former Managing Editor of the Burlington Free Press, who moved on from Burlington to spend 20 years as an editor in Washington for USA Today; and Dave Gram, one of the best AP reporters from the era when journalism was, actually, journalism. A workforce of that size would have had a solid presence in the Vermont of 40 years ago, when there were two fully -staffed wire service bureaus, Burlington and Rutland were credible statewide newspapers, and there were serious local papers in Brattleboro, Bennington, White River Junction, St. Albans, St. Johnsbury and Newport. You could even find must-read articles in weeklies in places like Randolph, Essex Junction, and Barton….

Galloway made her bones as a journalist in the early teens when she broke the EB5 story, the scandal that painfully discomfited the whole top tier of Vermont politics, including the Washington delegation and the Shumlin administration. EB5 was an excellent piece of work, which put Digger on the national map and significantly expanded its fund-raising capability. Digger sells some ads on its web site, but as at most newspapers, the web ads don’t begin to cover the real cost of news gathering and production.

In my last post, (Digger Reverts to Garbage Journalism on Health Reform) I laid out the case for the claim that the first Digger story this fall on OneCare Vermont was catastrophically bad, filled not just with errors of fact, but marked by obviously preposterous stuff, like the clear implication that the cost of health care was going up by a third in one year. The recent troubling Digger coverage follows on a nearly three-year stretch from 2015 to late in 2017, when the Digger coverage of health care reform was uniformly terrible, replete with errors, misinformed analysis and clear bias.

Would Anne Galloway deliberately publish article after article filled with false and misleading information? My conclusion is that she absolutely has, for an extended period in the past, and is doing so now. That conclusion is very important both for its impact on health care reform, and for the more general question of how Vermonters get their information about public policy across the board.

Let’s Go to the Evidence

A bit of scene setting is required for an assessment of the Digger performance on reform. As I noted at the outset, the reform project, which got off to a very strong start in 2013, ran into a wall of opposition in 2014. A group of Chittenden County Democrats and Progressives in the state Senate, like Sens. Tim Ashe, Chris Pearson and Michael Sirotkin, launched a broad-based assault on the University of Vermont’s Medical Center hospital and its network of hospitals in Vermont and New York.

It was “gobbling up” all the small players. It was taking over or driving out independent physicians, which the opponents said would increase costs. Over the following three years, the “gobbling up” theme morphed into a tale of greed and lust for power on the part of the UVM network and particularly its CEO John Brumsted that has wrecked UVM’s public image and still poses a serious threat to health reform.

A second form of opposition arose in the form of a significant portion of the primary care community, particularly several of the Federally Qualified Health Care Centers (FQHCs). An FQHC is a small group of primary care docs who get special subsidies from the federal government to ensure the delivery of care to under-served areas.

A third source was a separate group of primary care docs, and some stand-alone specialists that set up an organization to advocate for its own stand-alone surgical center to “compete” with UVM; and in the effort to get the necessary permit, its executive director, Amy Cooper, denigrated UVM at every opportunity.

Any news organization would wade right in to such a target-rich environment, and Digger did so. The question is: was its coverage even-handed and competent?

That assessment has to be broken into three sections. The first started in 2015 and ran to November of 2017. The reporter doing the work for Galloway in that era was a woman named Erin Mansfield. Her work, in my judgment, was very poor, filled with errors of commission and omission and was clearly biased. I’ll get into that further below.

In any event, Galloway fired Mansfield in late 2017 and replaced her with a guy named Mike Faher, who had worked for some years as a reporter in Brattleboro. Overnight, the Digger coverage on health care turned around. Faher had no special expertise or insight into the health care reform hairball; but he dug right in and produced a series of reports on what he could see in front of him, and they were fine—straight forward, no thumbs on the scale. The players in the reform field were almost giddy with relief. They even fell to speculating that Faher’s stories were fair because that is how is name is pronounced. The rat-at-tat opposition continued to flow from the normal array of opponents, but once it was mediated by normal press coverage, the temperature in the reform space dropped markedly.

The interregnum lasted just under two years. It terminated last summer with a huge argument in the Digger offices between Faher and Anne Galloway. Faher, a middle-aged guy with no job, quit on the spot. The argument was audible in the newsroom, a fact that gave rise to reports that Faher had objected to pressure from Galloway to hit UVM harder. I called Faher sometime later to ask about his confrontation with Galloway, and he refused to discuss it. Faher later went to work as a writer for UVM.

Last fall, Galloway hired Katie Jickling for the health care beat. The Digger website describes Jickling as a native of Brookfield, who interned at several news outlets before getting a permanent gig covering Burlington for the weekly paper, Seven Days. Although Jickling had no experience covering health care, she parachuted into the most vital, expensive and complex policy issue Vermont has seen in the modern era. Her first major piece ran on Oct. 20 of last year (“OneCare Vermont seeks approval of $1.36 billion budget”). It was full of errors and misleading conclusions. And the hectoring tone on both UVM and OneCare Vermont was striking. I count 19 Jickling stories bearing on health care reform, starting with her first piece on Oct. 20—the first report on the OneCare 2020 budget. All but four of those appear to me to advance the theme that UVM and OneCare are, at best, bumbling players that are degrading the delivery system. Much of the evidence for that proposition is simply wrong.

The reform system hasn’t saved any money. Not true. The annual inflation rate for the hospital system has been cut in half from 2013 to 2019. When compounded that performance has saved Vermonters just under $2 billion.
OneCare Vermont, a for profit company, is losing money and needs to be bailed out by the Legislature. Wrong. OneCare Vermont is legally required to be for-profit, but it neither makes profit nor suffers losses. It doesn’t have to be bailed out.
OneCare plans to “control” the delivery of care across the Vermont system. Wrong. OneCare is a small bureaucracy that manages the contracts between the various payers and the hospitals. The actual control of delivery of health services rests with the doctors and hospitals in the state. Every doctor and every hospital is free to withdraw from OneCare, if it chooses to.

The real problem is that neither Jickling nor anyone else at Digger understands what OneCare is actually all about.

An ACO like OneCare was invented in the federal law known as Obamacare. Its purpose is simply to provide an umbrella under which doctors and hospitals can come together to deliver all the necessary care to a block of patients for a fixed price. A Vermont example was the first contract in which Vermont Medicaid paid $93 million to four Vermont hospitals and some primary care doctors to provide care to 31,000 Medicaid recipients in the northwest quadrant of the state.

The key to this is the term “fixed price.” Each hospital got a check at the beginning of each month for taking care of the Medicaid patients that would come through its doors that month—and there wasn’t any more money coming, even if more patients than expected showed up and the hospital delivered more services to each patient than it expected. That process the precise opposite to the normal health care market, in which the more the docs and hospitals do, the more they get paid—by the public. This “fee-for-service” system is the engine that has driven health care costs in Vermont and the rest of the country into the stratosphere.

The new reimbursement project puts the doctors and hospitals at risk for the financial performance of the system that they run. That is the whole purpose of OneCare Vermont. It is just a box in which providers can cooperate to deliver care at a fixed price. The people who work in the box facilitate the contracts between the doctors and hospitals and the individual payers—Medicaid, Medicare, and private insurers like Blue Cross and MVP.

Digger and the Mansfield Era

An obvious question about the last couple of months of Digger coverage is whether the problems are the result of a new reporter who could get better over time. That is clearly possible, but a confounding issue is the almost-three year stretch from 2015 through most of 2017 when Digger operated a classic vendetta against the University of Vermont, its hospital network and OneCare Vermont, the ACO owned by UVM and Dartmouth-Hitchcock. The Digger coverage over that time was carried out by a reporter named Erin Mansfield. The Mansfield oeuvre is on line, and I suspect that some of my tiny corps of brilliant readers will want to read it to assess the validity of my assessment. For the rest, I offer here a detailed look at what I consider a typical performance: the Digger article of July 17, 2016 with the headline—“Special Report: Despite regulation, profits up.”

The top of the story notes that in the 10 previous years, Vermont’s hospitals had more than doubled their assets, tripled their profits, and increased the cash “they have on hand for rainy days.” Four hospitals had seen asset growth from 2001 to 2016. “An analysis by VTDigger shows that, although individual hospitals vary, Vermont’s 14 hospitals have, on average, improved their financial footing since the Green Mountain Care Board started regulating hospitals in fiscal year 2013.” The piece pays particular attention to what it describes as profits. “The total operating surpluses—also known as profits—tripled from $37.3 million in fiscal year 2006 to $110.4 million in fiscal 2015….

Assessment: There are all sorts of problems with this mess. They start with the headline, an indictment of “regulation,” which Digger asserts did nothing to prevent the hospitals from having a party at the expense of the public. For one thing, the figures used in the indictment range back as far as 2001 in one case to 2006 in another. That was why the Green Mountain Care Board members were so blown away by this broadside—none of the specific figures had anything to do with them. The story notes that the Board didn’t exist until 2012, but that got lost in the numbers that go back far before that.

Another major problem: Digger insists on describing the excess of revenues over expenses, the bottom line or margin, for the hospitals, as profits. They aren’t in a non-profit system. Calling them that is just a cheap way to slam somebody. It looks like greed, when in fact you can’t use that money for a party—it has to stay in the hospital coffers. And in any case, they are relatively small, low single digits while the real money is in the operating budgets. It is ironic that Digger entirely missed the fact that from 2000 to 2009, the hospitals did have a party: they doubled their budgets in the ‘aughts — the big docs and administrators took home huge pay increases in a system where some 60 percent of the expenses go to labor. The party was over once the Green Mountain Care Board got revved up in 2013 and cut the historical annual inflation rate in half; but that didn’t fit the Digger narrative.

You have to have at least a modicum of knowledge to find the blotches in above, but a reader with no knowledge of the issues at all could see Digger wandering into the weeds. I’ll cite the whole section in this assessment.

“And while net revenue from patient care is down to about $2.3 billion annually, the amount that hospitals charge insurance companies for services has been approaching $5 billion.”

Reality: Net patient revenue has never in the modern era come down. The total of $2.3 billion cited here is the total hospital spending; of that roughly half, or around $1.15 billion. is paid by government and the other $1.15 billion by private payers. The assertion that hospitals are charging private payers five billion has no connection to reality.

A second error: “Hospital budgets have been regulated for more than two decades. In 1992, the Legislature passed a law giving regulatory power to a now-defunct agency called the Hospital Data Council.”

Reality: The Vermont Hospital Data Council was established (around 1980) and it never had any regulatory power. (I was appointed its chairman in 1987, and if I had had any power, I would have known it.) The Legislature established state power to set hospital budgets in 1995.

The story above showed how skewed the Digger coverage of an issue could be. But there was another problem with Digger’s coverage—they would ignore clearly compelling news stories that didn’t fit Galloway’s narrative of evil machinations by the UVM devils. Example: the supposedly baleful effect of UVM’s network on the overall health care delivery system.

In the summer and fall of 2017, in response to an Ashe-led campaign, the Green Mountain Care Board ran a survey of Vermont doctors to ascertain their views on their working lives and their intentions for the future. The survey had a huge sample—more than 400 respondents in a state with fewer than 2,000 doctors—and it showed that neither primary care docs nor specialists were troubled by UVM’s role and that most intended to keep practicing as they had in the past.

A fully elaborated professionally designed survey like this is very rare in the political back-and-forth of policy debate, and it was equally striking that it so clearly ran counter to the narrative that had dominated Digger’s coverage for years. Digger never mentioned it….

In July of 2016, I was writing columns on reform for Digger, and I became concerned about Digger’s coverage. So I wrote a letter to Anne Galloway expressing that concern. I understand that this all may seem obsessive to my tiny corps of brilliant readers; but I am laying it out because I think it bears on the question of the likelihood that Digger will shift its health care coverage to a sound journalistic base.

July 26, 2016

Anne:

I believe that the Digger coverage of health care reform over the last couple of months is badly skewed. I have no idea whether you are willing to consider this, but I thought I would lay my concerns out in writing.

There have been three or four pieces that are troubling to me, but the issues seem to be concentrated pretty heavily in the Special Report: Despite Regulation, Hospital Profits Up. I consider this to be an absolute mess, starting with the headline. It blew away the Green Mountain Care Board and I don’t blame them. I don’t believe there is a vendetta against the board, but it sure looks that way.

The lead sentence sets the tone. Doubling assets, tripling profits etc. over the “last 10 years.” In the first place, there was no effective regulation until the Green Mountain Care Board went into operation in 2013. Nobody needs a special report to know that—its been written a thousand times. The GMCB isn’t responsible for that. And,
doubling assets, tripling profits, and days cash on hand don’t mean bupkus. Those numbers are brought forward just to make the board and the system look bad. Profits in a non-profit system are not profits. You have to give em back. You can’t just have a party with them. And if you don’t have them, you can’t borrow money at favorable rates. UMV used its increased bottom line to get a bump in its bond rating from BBB+ to A-, which will save patients millions of dollars over the life of the loans. And that is basically all days cash does—you can’t spend it on goodies because then it wouldn’t be “on hand.” And consider Porter Hospital in Middlebury. Days cash is 70 to 80 and their board is trying to sell themselves to somebody bigger, like UVM or DH or Rutland. The reason: low days cash makes them doubt whether they are a viable business.
The facts are that profits don’t amount to beans—as a number. Its three percent of the spend. The real issue is the other 97 percent, which is net patient revenue. (which your story said went “down to 2.3 billion, which it didn’t. It went up)
Here is a truly bizarre sentence: “And while net patient revenue is down to about $2.3 billion annually, the amount that hospitals charge insurance companies for services has been approaching $5 billion.” What the hell does that mean? Net patient revenue is what hospitals get paid. So, having gotten paid, they are now trying to double their money to $5 billion? Really?
What this kind of stuff is doing is teeing up the board and the system for health care reform opponents like Tim Ashe, and political gasbags like Galbraith, who are using your stuff as a club to beat on both the hospitals and the board.
Totally absurd stuff:
“Hospital budgets have been regulated for more than two decades. In 1992, the Legislature passed a law giving regulatory power to a now defunct agency called the hospital data council.” This is all wrong. The data council was established in 1983 (I was its third chairman, starting in 1987) and it never had any regulatory power at all. The state didn’t assume power to regulate hospital budgets until 1995.
A few weeks ago, Erin had a story talking about the split in the negotiations over a statewide ACO. She cited John Michael Hall and Patrick Flood and their testimony to legislators several months ago. That was all accurate; I wrote some of it in my column. The problem: it was months’ old. And at the time it was published, Flood had basically been kicked out of the group, and Hall and Moulton had shifted to the other side because of the behavior of Sharon Winn and Bi-State. No harm, no foul, but it looked ridiculous.
Digger coverage of the issues of Blue Cross and MVP rates is similarly garbled, but there is a consistent undertone of slanging at Al and the board, which is make them crazy.

I am not going to go into either of those issues because I’m tired of it all. I have always admired your reporting and I have liked working with you. I also understand how brutally hard it is to run even a small news organization. I barely made it two years—and I didn’t have to chase money at all.

But this state and its people have something like a half-billion dollars invested in health care reform. And I personally have 40 years into it. So, I am going to write about how skewed your coverage is. Nothing personal—if I was running a news organization, I would hire you first—but in my book, nobody gets a free ride for coverage like I have seen in the last two months. Health reform may fail, but I am going to do my best to make sure it doesn’t fail because nobody presented the public with the facts.

ham

Galloway’s response to this was that I was a shill for UVM and that she was sticking with Mansfield. At that point, I quit working for Digger. Fifteen months later, Galloway fired Mansfield and hired Mike Faher. And when Faher walked, she signed up Jickling.

Whither the Future

Given this record, what can we expect from Digger on health care going forward? It is impossible to know for certain. News coverage of an issue can turn on a dime, as evidenced by Digger going from full-on trash mode in the Mansfield era to full-on fair in the Faher interregnum and back to trash in the current Jickling tenure. It is also true that, while Galloway makes all the calls, there are real journalists in and associated with Digger, and they could have some impact on her trajectory. In fact, much of daily work pumped out by Digger’s mostly-young reporters is perfectly straight forward.

It is also true, however, that at the luminary level—on the issue of health care alone—there hasn’t been any visible light at all. In that sector, the luminaries have been hood ornaments. And there is no blinking the consequence: the health care project is about 85 percent of the way to real sustainability, something that has never been achieved in the United States. But the last 15 percent will be incomparably harder than reformers have experienced so far. The Digger narrative that reform so far has been a failure, and that the problem lies with the greed and lust for power on the part of UVM has infected the body politic and it is not clear it can be overcome.

I have been involved in this issue for 40 years, as a journalist, a regulator, a special counsel to the governor for health policy, a legislator and a member of the senior management in the UVM system; and I now believe that the chances for success are now less than even. Failure would be hugely damaging to every Vermonter, in both the medical and financial sense.

The issue will turn in significant measure in my view on whether the public and the legislature get the clearest possible picture of the whole process and the implications of each individual decision. They are not getting that now. I’ll post more on these issues in the next couple of months, but in the meantime, keep in mind:

Caveat lector: Reader Beware.

Digger Reverts to Garbage Journalism on Health Reform

October 22, 2019 Laurie Davis

By Hamilton E. Davis

After a two-year hiatus, VTDigger has reverted to its long campaign to take down the University of Vermont’s health network and the general cause of health care reform in the state. Exhibit A is the report by Katie Jickling on Sunday to the effect that OneCare Vermont is seeking a 33 percent increase in its budget to $1.36 billion, a gigantic number for a small, private company on the third floor of a faceless office building on Water Tower Hill in Colchester. And up 33 percent? In one year. Wow.

In the Digger report, it only gets worse. The company is losing money; it’s demanding that the state cough up $13 million to keep it afloat; the OneCare administrative costs are layered onto the administrative costs of Medicare, Medicaid and commercial insurers; the number of Medicaid recipients in the program using primary care is dropping; OneCare hides its financial data — all-in-all, Vermont’s only Accountable Care Organization is a basket case, a sinkhole for taxpayers’ money and a risk to their health care.

My tiny corps of brilliant readers can buy that kind of stuff if they see fit, but I think they shouldn’t. I have been committing journalism in one way or another for 57 years, and this is one of the worst pieces of journalism I have ever seen. Let’s count the ways:

First is the stuff about the OneCare Vermont “budget.” The $1.36 billion is contained in the budget filing, but it is nothing like a normal budget. The actual money that the OneCare umbrella organization would spend would be $19 million, assuming the Green Mountain Care Board approves that amount. That’s about one 75th of the budget in the Digger headline. The rest of the money is simply passed through to Vermont’s 14 hospitals for care delivered through the 2020 calendar year. The hospital budgets have already been approved by the Green Mountain Care Board. As for the proposition that those costs are going up by a full third compared to the spending in 2019, that is a perfectly slimy little trick that would be laughed out of any serious journalism organization. The reader is led to believe that the cost of the health care is going up by 33 percent, manipulated by the evil OneCare. The reality is that all but about four percent of the increase is driven by the growth in the number of Vermonters covered. Consider: there are about 550,000 Vermonters in the reform universe. The approved hospital budgets for 2020 come to just over $2.7 billion. A portion of that money runs through OneCare, and the remainder flows directly to hospitals. As the number of lives attributed to OneCare go up year over year—from 31,000 in 2017, to 112,000 in 2018, to 172,000 in 2019 — the OneCare portion goes up and the direct portion goes down. The total, however, remains the same, except for the three to four percent needed to cover inflation. Of course, the reason for this process has completely eluded Digger: we need OneCare so that payers can sign fixed price contracts with providers. And as for the Digger claim that reform hasn’t accomplished anything, the fact is that the average eight percent annual increase in hospital budgets that obtained during the period 2000 to 2009 has dropped in half in the reform era (2013-2020). Reducing the growth in spending from eight percent to four percent is a savings of $86 million in a single year.

The Worst of the Rest

The rest of the Digger piece illustrates the quality of the work, really poor, and more importantly, the motivation, which is incomparably worse. That distinction is critical, about which more in a moment. Meanwhile, let’s look at the rest of the article:

“OneCare is supposed to create savings in the health care system by focusing on preventative primary care.” That statement is not completely wrong, but it is highly misleading. Primary care spending amounts to about five percent of the total regulated by the Green Mountain Care Board, about $130 million out of the $2.65 billion spent on acute care. The real place to save is the 95 percent of the money going into hospitals. It will take a decade or more to see material savings from preventive care. If we can’t wrestle hospital spending into some sustainable form in the next two or three years, then the system will probably just collapse. In the meantime, it will be necessary to put more money into primary care. Which OneCare is actually doing although you didn’t read about it in the Digger piece.
“But the company is losing money.” It isn’t. OneCare, or more accurately its component hospitals, are taking risk. Which means that they may pay out on the Medicaid contract, but come out plus on the Medicare side. It is like an insurance company whose payouts do a sine wave around an actual real number. In a system that is highly variable, sometimes you’re plus sometimes minus. Digger said that in 2018 OneCare “lost $1.5 million on its Medicaid contract.” True, but Digger didn’t see fit to report that OneCare came out ahead by $7.6 million on their Medicare contract. Medicaid plus Medicare, net gain $6.1 million. By the way, the Digger piece says that OneCare “pools” the money paid out to hospitals. It doesn’t. The various payers have separate contracts with OneCare, and they are all different.
“But two and a half years into the all-payer system experiment, lawmakers worry that OneCare is not delivering on its mission. The number of Medicaid patients using primary care has dropped, for example.” A serious problem here: these judgments violate the ancient precept that in order to be valid, comparisons have to be made on an apples-to-apples basis. Digger has ignored this precept. The 2017 OneCare contract with Medicaid covered just four counties and four hospitals — Burlington, St. Albans, Middlebury and Berlin/Montpelier. In 2018 that number had increased to 10 counties. So, you have a completely different set of patients as well as providers. 2017 is apples; 2018 is tomatoes.

Well, there’s more, but to sum up: OneCare isn’t taking the cost of health care up; it is not losing money, it is not hiding its budget, every dime of which has to be approved by the Green Mountain Care Board; it is not dunning the State for money so that it can “stay afloat.” It could certainly use more money from Medicaid in order to invest in the reform system. None of this is to say that OneCare does not face huge challenges; it does. But you can’t see them in this Digger piece. And a perfectly fair question is, Why not?

I’ll get to that in my next post.

Vermont Reform Gets Down and Gritty

October 2, 2019 Laurie Davis

by Hamilton E. Davis

The recent round of hospital budget hearings by the Green Mountain Care Board marked a significant inflection point in the eight-year-long campaign to reform Vermont’s health care delivery system. Costs in the north-of-$2 billion system have been markedly damped down, but the process has been a long slog; and the advent of the Fiscal Year 2020 budgets have illuminated fault lines that are as deep as ever and that could still prevent full maturation of the reform effort.

That assessment sounds grim, if not bleak; and it should not be understated. It is also true, however, that the Green Mountain Care Board has opened up a two-pronged initiative that could point the way to a successfully recast system, in a relatively short time. The reform issue, in other words, is not yet decided, but the defining issues now are much clearer than they ever have been before.

The most important of those issues is how to manage the state’s small community hospitals, whose business model is badly broken here, just as it is across the rural United States; the second is how the political and regulatory players will deal with the University of Vermont’s health care network. Both of those questions are seriously fraught. The outcome will determine the kind of medical system Vermonters have in the 21st century. And, not incidentally, how much they will have to pay for it. To set the stage for that discussion we need an overview of where we stand now. (Stay tuned—it’ll be brief)

In its eighth trip around the budget track, the Board in mid-September approved system spending of $2.717 billion, a little over seven million dollars less than the 14 hospitals asked for in Fiscal Year 2020, which began Oct. 1 of this year. That is an increase of between 4.1 and 4.3 percent of hospital spending in FY2019, for which the Board does not yet have final figures.

The annual rate of increase during the Board’s tenure, which began with the FY2013 budget, is between 3.6 and a tick under 4.0; the difference involves some assumptions that won’t be resolved for some months. What is clear is an upward trend since 2016 in the system’s inflation rate from 2.8 going from 2016 to 2017 to just over 4 percent budget to budget between 2019 and 2020. The average rate over the Board’s tenure is 3.96.

That performance is far better than the eight percent rate the hospitals racked up from 2002 to 2009; but there is no gainsaying the fact the total system costs have moved from sustainable—under 3.0 percent in the 2016-17 window--to more than the Board target of 3.5 percent in 2019-2020. The regulators, and indeed all the players, need to figure out why that is happening, and what they need to do about it.

The Smalls and a Possible Fix

The single most intractable problem for Vermont reform is that more than half of the 14 facilities in the state are simply too small to function as fully elaborated acute care hospitals in the 21st century. Those hospitals were built for a 19th and early 20th century world, and the cost and complexity of modern medicine have left them behind.

Anyone who doubts this should consider the recent history of the Vermont smalls. In the 1970s, the two hospitals in St. Albans merged into one; in the decades that followed, Rockingham Hospital in Bellows Falls went out of business; Fanny Allen Hospital in Winooski, Central Vermont Medical Center in Berlin and Porter Medical Center in Middlebury joined the UVM network to avoid going on the rocks; earlier this year Springfield Hospital went on the rocks and is now in bankruptcy court; and Gifford in Randolph and Copley in Morrisville are losing money…

I believe any credible policy analyst would concede the point, but that doesn’t mean that a solution will be easy. There is a huge sunk cost in the physical infrastructure, which adds up to massive over bedding for the state, but which can’t be readily converted to other use. Moreover, the hospitals in small community towns are often the largest employer; and not just the largest employer, but the best-paying employer. An orthopedic surgeon can be a million-dollar earner in a small town, and there aren’t many of those jobs. Finally, the small hospitals in the state have a powerful presence in the Legislature.

Despite these formidable constraints, the Board has launched the first credible initiative to deal with community hospital financing. The proposal, crafted by Board member Jessica Holmes, called for any hospital that is either just breaking even or running in the red to be required to submit a “sustainability plan” to the Board, showing how it would change its operations so as to get reliably into the black. Holmes added a second criterion: if a hospital’s request for a charge increase for commercial payers exceeded medical inflation for three of the last five years, it would also be required to submit a sustainability plan.

In laying out the plan at the Board’s last budget session, Holmes described it as a “first pass,” but she elaborated on it at some length, laying out a broad path that essentially captured the latest thinking in policy circles about how to grapple with the community hospital crisis. (the following quotes are taken from the notes Holmes spoke from at the meeting.)

To get at their basic financial structure, she said, hospitals could explore collaborations with other facilities, shared services, shared work force, centralized purchasing… a second consideration should be to prepare for the possibility that the 340B program, which provides federal help to pay for drugs, might go away. For some small Vermont hospitals, 340B is the difference between red and black ink.

A critical piece of the sustainability question for small hospitals would be an assessment of the financial efficiency of their various service lines. For example, in the Springfield bankruptcy case, the new management of the hospital closed a new maternity wing because it was delivering just one baby every three days and losing huge amounts of money in the process.

“Some hospitals resisted this question in the hospital budget process,” Holmes said, “but other hospitals, even small ones, were able to identify service lines that were losing money.” If a hospital is losing money on a specific service line, dropping that line could help with their problem, she said.

Holmes also called for a concurrent examination of the quality of services being delivered. “Is our volume high enough to support this service at a high-quality level?” is a question that hospitals should ask of every service line, she said. “We know volume and health outcomes are related…the literature is clear that for certain procedures, patients in low-volume hospitals experience more adverse health events.”

For example, she said, the Vermont Department of Health reports that some hospitals are doing as few as 15 hip replacements and 30 knee replacements per year. Germany, Holmes said, won’t let a hospital do knee replacements unless it does at least 50 per year. “Hospitals need to look at volume and justify continuation of low volume services,” she concluded.

Another necessary perspective in the Holmes proposal was the access question. “What services are critical to deliver close to home?” she asked. “What services could be delivered more cost effectively or at higher quality elsewhere? Would increasing transportation be a better approach? Or increasing telemedicine?”

In its final budget orders, the Board ordered seven of the state’s 14 hospitals to provide a “sustainability” analysis in the coming fiscal year. Hospitals in Brattleboro, Berlin, Morrisville, Randolph, Townshend, Newport and St. Albans must work with the Board to determine specifically what the new template must cover in its report.

The Holmes proposal and its attendant questions get to the heart of the broad questions that formed the basis of the Vermont health reform project when it was designed and adopted by the Legislature in 2011: what should the Vermont hospital-doctor structure look like in the 21st century? The answer, in essence, is that the care should be accessible, that it should be high quality, and it should be financially efficient—that is, affordable.

The system doesn’t look like that today, and it will be hellacious to actually make it do so.

Can We Actually Get at Costs?

A maddening enigma in the whole health reform landscape is teasing out the actual cost of care as money flows through the system. I wrote about this two years ago and I will summarize the content here. Traditionally, hospital financing has operated in a funhouse atmosphere. What they basically do is calculate the amount of money they need to run the place, and then they just build their public set of charges any old way. Doubt that? Here’s what the Green Mountain Care Board found when they decided in the spring of 2017 to look at the pricing of various procedures in the state’s hospitals. Consider a patient with a broken leg. At Rutland, the listed cost to fix was $6,379. At Gifford, $31,941 (not a misprint), five times as much. At Northwestern in St. Albans, $9,709. Copley in Morrisville, $25,731…

Below the surface of the funhouse, there is a level of financial detail that is opaque and complex, but at least is not as patently ridiculous as the world portrayed in the charge masters of the individual hospitals. The details are something of a bureaucratic nightmare, however, and not worth tracing out for the purposes of this discussion. For the fact is that people who have the best picture of a small hospital’s costs by service line are the people running the hospital itself. And right there is the crux of reform.

Everyone will agree the care provided by each hospital should be of high quality and make sense financially. What no one in the Vermont firmament has been so far willing to talk about is the prospect that some, or maybe many of the state’s small hospitals will not be able to do that. And if they can’t meet modern quality and cost metrics, then what happens—do those hospitals close, or recast down to something less a full-scale hospital—a primary care practice, for example, possibly with an emergency room, and some other basic functions?

Or will they fight like tigers to keep everything they’ve got, despite the metrics. Or just try to drag the process out as long as possible, to avoid grasping the very painful nettle. An even blacker cloud hovers just over the horizon. In pure medical and financial terms, it makes no sense that a state of just over half a million people supports as many as 12 hospitals doing hip replacements, but what if abandoning the hip replacements means that the hospital can’t afford to do the stuff that people in their service areas absolutely need, like primary care, or emergency services?

The reality is that in the current small hospital business model, stuff those hospitals shouldn’t be doing may be the only way to pay for stuff they must do. Nothing the big players on the field – the Green Mountain Care Board, OneCare, the Scott Administration, the Vermont Legislature – have said so far indicates that they have any clear idea what to do about the crux of the reform movement.

The single thing I have heard so far that points to a potential resolution was the comment by Dr. John Brumsted, the chief executive officer of the University of Vermont Health Network, to the effect that the only workable structure involves small, medium and large hospitals affiliating into integrated structures. Such a process is widely underway in the U.S.; it is especially prevalent in the northeastern tier, including Maine, New Hampshire and northeastern New York.

In Vermont, however, vertical integration faces myriad challenges, not the least of which is a political environment that is hostile to UVM’s health network. I’ll comment on that in my next post.

Does New York's North Country Have Lessons for Vermont?

August 5, 2019 Laurie Davis

by Hamilton E. Davis

Over the last few years, a storm has been gathering over Vermont’s community hospitals, especially those with the “Critical Access” designation that gets them extra federal financial support. Despite that support, the storm is right overhead: Springfield Hospital went bankrupt a couple of months ago; hospitals in Morrisville, Randolph, Newport, Windsor and St. Albans are on track to lose money this year, with dropping patient flows and rising expenses. Two others, Porter in Middlebury and Central Vermont in Berlin, were on a similar path when they sought shelter in the University of Vermont’s health network.

There is no mystery about the financial storm and the damage it is causing, but there has been a total dearth of critical thinking about how to repair the damage. The Scott administration, the Green Mountain Care Board, OneCare Vermont—all have viewed with alarm, but with no serious discussion about a sustainable vision for the state’s small hospitals. Which is interesting, given that precisely the same storm passed over the northeastern corner of New York State a few years ago and the damage there has been fixed.

The North Country Model

New Yorkers call the far northeastern part of their state the “North Country.” The northern and eastern most part is a three-county swatch that includes the northern Champlain Valley and the eastern foothills of the Adirondacks. Ranged along the Canadian border are Franklin and Clinton counties, with Clinton to the east, on the west shore of Lake Champlain. South of Clinton lies Essex County, also bordering the lake. Those three counties are our focus here. There are four medical facilities in this rough quadrangle. The anchor is Champlain Valley Champlain Valley Physicians’ Hospital in Plattsburgh, a smallish near-tertiary center with about 340 staffed beds. I say near-tertiary because until recently, CVPH would perform open heart surgeries. To the northwest is Alice Hyde in Malone, about half the size of CVPH. Due South of Plattsburgh is a 25-bed critical access hospital in Elizabethtown in Essex County; and east of E-town, overlooking the lake, is Moses Ludington in Ticonderoga…Ludington was a full-service hospital, and now isn’t.

So, call it four hospitals in a depressed, mostly rural area in the shadow of the Adirondacks. Beginning some 30 years ago, the four hospitals began to fall victim to the plague that is afflicting the small, rural hospital environment across the country. Little towns began to hollow out, American medicine grew vastly more complicated, as well as expensive; the little hospitals strained to keep up, medically and financially.

My tiny corps of brilliant readers has read about all this before, but I think they should hear from someone else on the subject. In December of 1997, the Wall Street Journal sent its top medical journalist, a woman named Lucette Lagnado, to Ticonderoga to write about Moses Ludington Hospital. I’ll pick out a few highlights, but my readers should click here to see a superb description of a slow-moving, financial, social and medical train wreck. And keep in mind that her report was printed in 1997, 22 years ago.

At that time, Lagnado wrote, Moses Ludington in Ticonderoga was a 40-bed hospital that “may have outlived its usefulness. Its beds are empty: On one recent night only four patients were on hand. Yet it still employs more than 100 people, almost half of them nurses. Operating at a deficit for years, it has been in default since 1990 on federally guaranteed debt that now totals $9.5 million.

“Only New York State’s peculiar system of hospital bailouts and price controls has kept Moses Ludington alive. Propped up by artificially inflated rates, it has been one of the most expensive hospitals in the country, though it lacks such basics as imaging equipment for MRIs and CAT scans. In 1994, a routine baby delivery cost about $3,800 at the illustrious Columbia-Presbyterian Medical Center in New York; at tiny Moses Ludington, it cost twice that...by the end of 1994, Moses Ludington was commanding an average of $12,650 to treat conditions like peptic ulcers and bronchitis with complications, compared with about $3,000 for rivals in the region.

As far back as the 1980s, the local hospital issue was tearing the little town of Ticonderoga (pop. 5,000) apart. Some residents wanted to save Ludington, whatever the cost. Others thought the whole thing was crazy. Both sides also hated one another. Lagnado herself couldn’t see any sensible way forward, and she closed her piece with a quote from the town’s top official:

‘“There is incredible passion about the hospital,”’ says Michael Connery, the town supervisor, current funeral director and owner of the local radio station. But he says the sentiment largely misses the point: The time for Moses Ludington is long past. We should have lost that hospital 10 years ago,” he says flatly, adding that downsizing sharply is the only hope. “There’s a lot of growing up to do around here.”

Growing Up, c. 2015

About four years ago, the medical players in the North Country began to do just that. The key to the solution was linking the four hospitals with one another and then affiliating them with the University of Vermont’s health care network. The designer of the recast North Country system was Dr. John Brumsted and his senior management team. Brumsted is the CEO of the network, which is based on the University of Vermont’s academic medical center in Burlington, and includes two other Vermont facilities, Porter Medical Center in Middlebury and Central Vermont Medical Center in Berlin.

Long Ties

There have been informal ties between the North Country and the Burlington medical community for years. In 1975, Dr. Art Levy, a cardiologist at the Medical Center in Burlington, began traveling regularly to Malone to advise patients and doctors at Alice Hyde. The UVM College of Medicine sent students and residents for rotations in Plattsburgh; one of those was Brumsted himself, then an obstetrics and gynecological surgeon in training; residents living in the Ticonderoga area often traveled across the Champlain Bridge to have their babies at Porter Hospital in Middlebury, Vt.

The North Country, however, is a relatively depressed area, and while the health care system in Ticonderoga had been severely troubled for decades, similar problems began to show up in places like Plattsburgh and Malone. And when it did, the New Yorkers began reaching out to UVM for help. The detailed story of how all the pieces went together is too complex a saga for today, but the results have been both clear and striking.

The solution looks like this:

The problem in the southern tier was Moses Ludington Hospital; there was no way to render that facility sustainable as a full-fledged hospital; so Brumsted shuttered the hospital, and converted it to what they called a Medical Village, with strong primary care and a fully equipped Emergency facility, supported by both lab and imaging services.
By far the most solidly run player in the area was the critical access hospital in Elizabethtown. When I talked to John Remillard, the CEO there, he told me that the hospital had 10 straight years in the black; and that the hospital did no inpatient surgery at all. I was amazed at that—most critical access hospitals in Vermont fight like tigers to rack up every surgery they can get. In any event, Brumsted turned the management of Ticonderoga over to E-town. Effectively, the move collapsed two management teams into one; and they have been affiliated into the network as one unit.
Meanwhile, the big hospital in Plattsburgh sought out a relationship with UVM because the New York managers thought they needed more access to the professional resources in Burlington. So, Plattsburgh affiliated with the UVM network.
At around the same time, Alice Hyde in Malone was increasing its ties to Plattsburgh, by sharing doctors and other functions. Eventually, Alice Hyde affiliated with the UVM network by virtue of its ties with Plattsburgh. The effect was to collapse those two managements into one, which now reports to Brumsted.

The vision for the North Country solution can be summed up in Brumsted’s mantra that medical care has to be delivered to the right patient at the right place and at the right time. That is so obvious that it has become a cliché, but it happens only rarely in American medicine. An example of where it mostly doesn’t happen is Vermont, which is the whole point of reform in our state, about which more later.

For now, some critical details about the way the North Country actually works:

Most surgery short of the most complex takes place at CVPH in Plattsburgh. There is no standard in-patient surgery in Ticonderoga or E-Town; it all goes to Plattsburgh, or Burlington. Example: about a year ago a young man of my acquaintance suffered a severe attack of appendicitis. His mother drove him to E-town where the ER docs immediately sent him by ambulance to Plattsburgh, where the docs yanked the appendix. That kind of thing means that instead of maintaining routine surgery in the southern tier with low volumes and high fixed costs the volume goes up at Plattsburgh, which means that the fixed costs are spread and the surgical teams stay sharp.

Another critical example: When the UVM system took over Plattsburgh, Brumsted and his team looked at the high-end surgery there. A major question was the efficacy of the cardio-thoracic team, which did open heart procedures like coronary artery bypass graft, CABG, known in the biz as “cabbage” or just, “bypass.” Plattsburgh was doing about 110 bypasses per year; barely two a week, which routinely led to millions of dollars of losses per year—one of the reasons the key players at CVPH wanted help from UVM in the first place. Moreover, Brumsted knew that 150 or so residents of the North Country were going around Plattsburgh each year to get their bypasses in Burlington.

Still, the changes UVM was imposing on the four-hospital system were wrenching and politically fraught, so Brumsted worked hard not to be overbearing. Gathering the cardiac team and the hospital senior managers, he told them he wouldn’t make any changes for three years—on one condition: that they tell him face-to-face that they were confident enough about their quality that they would bring their own family members there for a bypass.

Shortly thereafter, the hospital management told Brumsted they couldn’t meet the condition. So the cardio thoracic surgery team went away and the New York bypasses came to Burlington. What the Plattsburgh docs could do was the catheterization procedure that precedes bypass surgery, so Brumsted kept them doing that work, and increased the volume there by shifting the catheterization of New York patients back to Plattsburgh.

Cases like that are dramatic, of course, but according to John Remillard at E-Town the integration of the North Country medical resources leads regularly to cost savings. A couple more examples: about a year ago, E-town lost its top computer manager to a nearby university and Remillard faced the need to replace him. Instead, he simply called Michelle LeBeau, the CEO in Plattsburgh, and she assured him that if he ran into a bad computer system problem she’d send her IT person to help him fix it. Savings: low six figures.

Another example: two critical players in the southern tier are the docs running the E-town-Ticonderoga primary care and Emergency systems. In most places, those jobs are full time, and very well paid. The chief of primary care at E-town and Ti is Dr. Rob Demuro. In the UVM system, Demuro manages the primary care side—in 10 percent of his time. The remaining 90 percent of his time he works as a primary care doc. His Emergency system counterpart is Dr. David Claus. He both manages the E-town, Ti and emergency systems, and takes a regular turn as an ER doc.

“If I had to pay for two full-time management jobs there,” Remillard says, “I couldn’t make my budget.”

Is the job complete in the North Country? Net yet. Alice Hyde in Malone is integrated with Plattsburgh only partially, mostly at the management level. Michelle LeBeau is the president of both Alice Hyde and CVPH, and there are also single top management jobs that now cover both hospitals. But the service lines at Malone might need more work.

I have not yet been able to quantify the specific dollar savings flowing from the integration of the North Country medical system, but it has clearly been more than welcome to the New York State Department of Health. The department invested some $15 million in the conversion of Moses Ludington from a hospital to a “medical village” and, according to John Remillard there was no way the state would have done that without assurances that the UVM health network would oversee the North Country system.

The reason for laying out the North Country experience for Vermont readers is that there may be very valuable object lessons there. It will be interesting to see whether the Vermont reformers take a close look at the North Country—UVM network nexus. For example, might the problem at Springfield be solved along the lines of the Ticonderoga experience? And what does the Plattsburgh experience suggest for the small Vermont hospitals scrabbling for the most complex—and lucrative—cases they can possibly manage, even if they don’t make medical or financial sense?

So far, there is no evidence the Vermont reformers have even glanced.

Deep Stresses in the Vermont Hospital System Surfacing This Summer

July 16, 2019 Laurie Davis

by Hamilton E. Davis

Vermont is now entering the eighth summer of its health reform project, and this one promises to be different from all the rest. So far from being the doldrums of the policy year, summer in health policy is actually the crest. On July 1, the state’s 14 hospitals submitted their Fiscal Year 2020 budgets and they will be critical—cost containment is still the highest priority for the reform managers. In a couple of weeks, the Green Mountain Care Board will hold its annual hearings on the rates that Vermont Blue Cross and the New York-based carrier MVP can charge customers on the federal insurance Exchange. And sometime soon, federal Medicare officials will visit the state to check on the most important state reform effort in the U.S.

All of these processes have taken place in recent years, of course, but this summer will be different both qualitatively and qualitatively. The broad shape of reform is now clear, but the structure in place is still far from mature: major decisions remain to be made, and many of them will be as difficult as the initial steps were. For there have been tectonic shifts in the geology of the state’s hospital system.

Let’s count the ways:

The Community Hospitals

One of the anomalies that make reform in Vermont complex is its asymmetrical hospital infrastructure. The UVM health network’s Medical Center Hospital in Burlington dwarfs the other 13 facilities in the state. UVMMC delivers roughly half the care in the state. A not-so-obvious anomaly is that the dominant hospital for the eastern half of the state is Dartmouth-Hitchcock Medical Center in Lebanon, N.H. D-H is the referral center for community hospitals in Randolph, Newport, St. Johnsbury, Windsor, Springfield, Brattleboro, Bennington, and to some extent, Rutland.

One of the most difficult problems facing Vermont reformers is that most of the community hospitals are too small to function efficiently, either in financial or quality terms, in the 21st century medical world. Of course, nobody wants to talk about that because of the very important role the small hospitals play in their home communities. But the issue is becoming too pressing to ignore much longer. Consider the evidence. In the modern era, three hospitals have basically gone away. Kerbs Memorial in St. Albans merged with a second hospital in town; Fanny Allen in Winooski gave up independence and joined UVM; Rockingham Hospital in Bellows Falls went broke and closed. In the nearer term, Porter Hospital in Middlebury joined the UVM health network as it was going on the rocks; as did Central Vermont Medical Center in Berlin, although CVMC wasn’t obviously going on the rocks. And right now, Copley Hospital in Morrisville, and Gifford in Randolph are losing money. Plus, Springfield Hospital is actually on the rocks—AKA bankruptcy court.

In response to this trend, which is national as well as regional, the Green Mountain Care Board has launched a study of the rural hospital issue. A major driver of this trend is the fact that many community hospitals have built their financial structures around relatively sophisticated medical procedures, like hip and knee replacements, that bring in big money per case, but are not economically efficient because their volumes are too low. The weakness in that strategy is getting more and more obvious every day. In the last three budget review cycles by the Green Mountain Care Board, the members have pointed out a persistent pattern in small hospitals of expenses rising, while revenues coming in are declining. That pattern makes it clear that the financing for the small hospitals is not sustainable.

Nobody so far has suggested what to do about the problem, but the issue won’t wait much longer. Watch the hearings for a hint.

Hospital Budgets

The hospital budgets for Fiscal Year 2020, which open Oct. 1 of this year, will have to be looked at in a different light than in the past. One of the main reasons is the decline of the small hospital network, as set forth above. The small hospitals usually exceed the Green Mountain Care Board’s cap target, but they are not usually held to account for that. The thinking seems to be that, what the heck, the overage for each individual hospital is small, and everyone understands that the little guys are struggling. So, let it go. There would be some stern talk about falling patient volumes, increasing expenses, and negative margins, and exhortations to change the business model. But that would be about it, until the next year, when the whole dance would occur again.

Any who doubts that is invited to consider the Springfield experience. When Springfield Hospital stunned everyone by telling everyone last winter that they couldn’t pay their bills, the reformers leapt into action. The Agency of Human Services wrote them a check for $800,000 to keep them afloat. And when the hospital administration came into the Board a few months ago and asked for a rate increase, they got it, basically no questions asked. Hey, you can’t kick ‘em when they’re down.

And once the hospital brought on Mike Halstead of Quorum to run the place, it hasn’t sugar coated anything. Halstead very clearly said that the hospital couldn’t survive without a “partner” (read: someone to drop a bag of money on the place to rebuild it); he said just as clearly that he hadn’t been able to entice Dartmouth-Hitchcock into that role. In other words, nobody has an answer to what is a very serious illness. Moreover, the reformers have to worry about Copley, Gifford, Mt Ascutney (Windsor) and North Country (Newport) that are showing many of the same symptoms.

A second conundrum for the Board is how to regulate UVM’s Medical Center budget, and the other two units in its network—Porter in Middlebury and Central Vermont in Berlin. The UVM Medical Center is an entirely different beast from the community hospitals. It’s not just that the UVM facility is much bigger than anyone else, although it is. It also has a different financial structure. Its doctors don’t get paid fee-for-service, they get paid salaries. Which is a huge difference. Paying for each unit of care is a powerful incentive for overuse. At UVM, by contrast, the big challenge is getting the work done that walks in the door.

For the first five years of the Board’s reign, the UVM Med Center came in right at or under the cap. The most illuminating evidence came in 2017, when the Med Center went $40 million over its budget and yet the system wide cost dropped from a 4.4 increase in 2016 to a 2.8 percent bump in to 2017. The only way that happens is if some of the patients that had been going to small hospitals went to UVM instead, and if, when they got there, they were dealing with different medical practice patterns that are less driven by the profit motive, and more by medical necessity. In fact, nearly all of the positive elements in the first five or six years of the Vermont reform era in the budget dimension were delivered by the UVM Med Center.

At the same time, however, a narrative was born in the political environment that UVM was a really bad actor, that it was trying to destroy the other elements in the delivery system. That narrative never infected the Board itself, but it made it much easier for the Board to think of UVM as a piggy bank for the state. Example: last year’s hearing on Blue Crosses insurance premiums. In the last couple of years, Blue Cross has been coming in for rate increases inflated far above the rate occurring in the hospital system. When the Board gets in the hearing room in Room 11 of the State House, they know they will be dealing with a whole bunch of people in red tee shirts contending that no one can afford those insurance rates. They’ll hear the same thing from Vermont’s Health Advocate.

The Board will cut the Blue Cross rate ask some—it’s over 15 percent in the rate case that will be held in the next couple of weeks. But there is no way they can keep the advocates happy. So, when the Board got to the UVM Med Center budget last year, they refused to let UVM charge Blue Cross for its share in the underpayment by Medicare and Medicaid. That took a bite out of the UVM bottom line, which is essential to UVM’s ability to borrow money in the bond markets.

The same issue will be on the agenda in this summer’s hearings. But UVM’s ability to function as the Vermont reform piggy bank is rapidly declining. The reality is that Medicare and Medicaid do not pay the actual cost of the medical care they buy, and if they can’t shift any of that loss to private payers then they will have to cut into their own muscle. And if that happens, the real victims will be the thousands of Vermonters who pour through the state’s biggest and most important hospital every day.

So, big challenge for the Board. And, of course, there will be no shortage of voices saying it’s all UVM’s fault. And their job will be to evaluate that side of the ledger. The real issue underlying all of this is whether the Medical Center’s inflation rate is being driven by new patients getting high quality care. The problem:

Neither the Green Mountain Care Board nor the Scott administration, nor the Legislature, nor the insurance industry, nor any other element of the regulatory system has any ability whatsoever to distinguish medically justified care from that which isn’t.

It isn’t as though the Board hasn’t thought of it. Several months ago, the GMCB staff and the finance people from the hospitals began looking at ways to shift the regulatory base from Net Patient Revenue (the total spent by each hospital for delivering care) to the cost per capita spending in each hospital service area. That metric turns the financing picture upside down. If you focus on Net Patient Revenue the UVM system look wildly expensive. In the past, by contrast, Cost per Capita has showed UVM to be, by far, the least expensive care in Vermont.

The reality is, however, that the contemplated shift is nowhere near ready for prime time; there is no assurance that it would even be ready for the 2021 budgets, which will be going together in just six months.

The question on the table, then, is whether if UVM exceeds the 3.5 percent cap, it will get punished by the Board. Which would be a major mistake, because UVM, after five years of grinding costs out of its own system, is starting to run too lean.

Evidence? Compare the experience of Porter Medical Center in Middlebury and Springfield Hospital on the eastern side of the state. When Porter went on the rocks a few years ago, they just joined the UVM network and their problems went away. UVM provided the financing to get by the crisis, and their vastly superior organizational muscle was available to ease other problems at the Middlebury facility. The same thing is true for the Central Vermont Medical Center in Berlin.

A very different recipe at Springfield. That hospital, like all of the community facilities in the Connecticut River valley, refer their complex patients to Dartmouth-Hitchcock Medical Center. in Lebanon, N.H. When Springfield went into the weeds, they pleaded—actually begged—D-H to rescue them. Not a chance. Despite the fact that the New Hampshire facility gets some 40 percent of its traffic from Vermont, and realizes several hundred million dollars in revenue in the bargain, D-H evinces no interest at all in the Vermont situation. Its focus lies instead on its prospects to the southeast, where Boston’s medical behemoths are pushing north. Another probable constraint is the very heavy regulatory regime in Vermont compared to New Hampshire, and the near impossibility of getting any investment support from state government. The fact is that the costs of reform are being borne entirely by the hospitals themselves, and D-H has no interest in taking on that burden for the state’s east coast.

So, Vermont is on its own when it comes to problems in Newport, St. Johnsbury, Windsor, Springfield and Randolph. Not all of those are in trouble now, but several are; and neither the Scott administration, nor the Green Mountain Care Board, nor OneCare Vermont has a clue what to do about it.

Scale

One of the most persistent challenges Vermont reformers face goes by the name Scale. The scale problem grows out of Vermont’s agreement with federal Medicare officials to get 70 percent of its eligible population (and 90 percent of its Medicare recipients) into fixed price contracts by 2022. Under these so-called risk contracts, the various payers—Medicaid, Medicare, Blue Cross and, sort of, self-insured employers contract with a bunch of doctors and hospitals to provide all necessary care to large groups of people for a set price. That process is the central element in Vermont reform.

The problem so far has been that while the number of Vermonters included in the system has grown steadily, it has not grown fast enough. The number involved in risk has grown from 30,000 in 2017 to 110,000 in 2018 and to about 170,000 in 2019. (These numbers are approximate). The shortfall currently is a little over 200,000 lives; and the question is whether the reformers can make up the slack between now and 2022. What will that take?

A part of the bottleneck in the system is the number of primary care physicians that will attribute their patients to the OneCare Vermont, the entity that can contract with payers under fixed price contracts. For the past three years, there has been considerable reluctance on the part of elements in the primary care community to do that. That reluctance is easing, but it is not clear whether it is easing fast enough. We’ll know more about that by fall, when the payers and OneCare put the 2020 agreements together.

Another piece of the bottleneck is the posture of Blue Cross of Vermont. Blue Cross attributes part of its customer base in the federal insurance Exchange, but the real issue is whether the Blues will try bringing a big chunk of the big-employer-self-insured community into OneCare. The Blues don’t bear the insurance risk for those patients, but they manage the paperwork for them, and therefore have a strong role in the decision. Over the last few years, the Blues were basically having no part of it.

That may be changing, however. Kevin Stone, the acting CEO of OneCare, has been working closely with the Blues top management, and if they can craft a product that the big employers will buy, it could go a long way toward getting to scale.

Bernie’s Medicare for All Plan Needs a LOT of Work

June 26, 2019 Laurie Davis

by Hamilton E. Davis

Back in the years when Bernie Sanders was mayor of Burlington, command central of Vermont state government was the committee room of House Appropriations, a cramped, ornate aerie on the third floor of the state capitol. The centerpiece was a long rectangular oak table with 12 chairs, one for the witness of the hour, the other 11 for the committee members. Every dime spent by Vermont government had to receive its blessing here.

When the custodians of one or another portion of the state budget would pull their chair up to the table, they might notice a small piece of tape affixed to the edge. “Fasten your seat belt,” it read. Having absorbed that, they would raise their eyes to the opposite wall where there was another small piece of white tape. “What is it about No that you don’t understand,” it said. And at the end of the legislative session, the advocates and bureaucrats who knew they could not possibly live with the amount of money they had been allotted were invited in for one last appeal. The committee called it, “Whine Day.”

I’m not sure whether Bernie ever subjected himself to the rigors of the House appropriations process, but the enduring reality about government financing manifested there illustrates why his “Medicare for All” initiative is orders of magnitude more complex than he imagines. The reason: Neither federal nor state government can raise taxes fast enough to pay for the American health care system as it is now organized and financed. The only people who can keep up with costs that rise at multiples of the underlying rate of inflation in the economy are big employers. If IBM or John Deere get hit with a big increase in health insurance premiums they can build it into the price of computers or tractors very quickly. And they do. It has become a cliché that the biggest single cost of building a General Motors car is the cost of health care for its workers.

That does not mean that Medicare for All is impossible, only that it would require changing the way health care is paid for. That in turn means recasting its current corporate structure so as to shift the financial risk from the public to the doctors and hospitals themselves; and if you do both of those things you’ve uprooted the whole culture of the delivery system. Carrying out such an enterprise is hideously difficult—but it can be done, and one of the supreme ironies of the whole Bernie thing is that it is being done in Bernie’s home state of Vermont, and nowhere else. It is doubly ironic that Bernie has never evinced any interest whatsoever in the Vermont reform project.

The essence of the Vermont reform project is that it aims first to solve the problem illustrated by the House Appropriations process—getting costs under control. Only then can you think about shifting the 50 percent private share of the whole cost onto government financing. Vermont’s reform law, passed in 2011, established as a first step a regulatory body called the Green Mountain Care Board, with two mandates. The first was to put a cap on the annual increase in the costs of the state’s 14 hospitals; the second was to oversee a shift in hospital reimbursement from fee-for-service to block financing for blocks of patients.

The latter step means midwifing fixed price contracts between various payers, like Medicaid, Medicare or Blue Cross and groups of providers—doctors and hospitals—that can deliver a full range of necessary services to sizeable blocks of patients. The Vermont reform initiative has been quite successful in stage one, which amounted essentially to capping the cost of its 14-hospital system at an inflation rate of 3.5 percent per year. In fact, the final figures for Fiscal Year 2017 came in at just 1.7 percent over the previous year.

Keeping that sustainable rate, however, will require that the second stage—the fixed price contracts—also succeed, and accomplishing that goal will be far more difficult. Vermont has an agreement with the federal government to get 70 percent of its eligible population into risk contracts by 2022; the feds will require that 90 percent of Vermont’s Medicare recipients be enrolled.

Vermont’s current trajectory on the risk contracts is well short of that necessary to meet the 2022 deadline. The reasons for the slow pace amount to an augury of the kind of dynamic that could destroy a badly designed national Medicare for All program. By badly designed I mean a program that leaves fee-for-service reimbursement in place, and then loads that unworkable system with a huge new slug of demand.

A simple example, in approximate figures: the acute care delivery system in Vermont spends about $2.6 billion per year. That figure comprises the cost of doctors and hospitals; it does not include non-acute care like nursing home services, home care and social services associated with acute care.

Roughly half of the acute cost is now paid by government in the form of Medicare and Medicaid. It is important to note that government payments do not cover the actual cost of delivering the care. A rule of thumb is that Medicaid pays about half the real cost, while Medicare pays about 75 percent of the real cost. That means that the shortfall has to get picked up by private sector payments from insurance companies or large, self-insured employers. The shortfall, or “cost shift,” in Vermont in 2017 was $455,111,000, and we’re headed for a cool half billion dollars—the budgeted figure for the cost shift in 2018 is $486 million and in 2019 the number is $492 million.

That shows that some 20 percent of the total acute care cost has to be absorbed somehow. I’ve read the health care material in Bernie’s book, and some of the ocean of commentary from the health policy community, but I haven’t seen anything to indicate that people are yet focusing on the key metric, which is the allowable inflation rate and how that would impact the operations of the delivery system. They typically note that Medicare for All would have an impact on doctors and hospitals, but that’s just Homer Simpson commentary. The critical question is how to deal with the impact.

We have seen the political hit the idea took when former Governor Peter Shumlin tried to install a Vermont-level single payer—same concept—in 2014. Shumlin’s reform team worked on it for more than two years, and they concluded that there was no way the state could afford it. The payroll tax necessary to pay for it was too big a lift. That policy train wreck destroyed Shumlin’s political career.

And those numbers were just for the first year. The first year is always easiest in a political sense. The number will be big, but if you can generate enough political momentum then it gets passed, and everyone thinks, “Whew, it’s done.” The real problem, however, comes in the out years, when the big number you survived once grows, and grows and grows. And if the inflation rate exceeds the inflation rate in the general economy, you run into the iron realities of Appropriations Committees everywhere.

That conclusion isn’t just some theory. It is precisely what happened when Medicare and Medicaid fired up in 1966. By the early 1970s, the federal government, and all the state governments were running for cover, because the increased demand was generating inflation rates at three, four, five times the rate in the overall economy. The cover they found was to dump the unbearable part of the cost onto the private sector. With Medicare for All, there is no place to hide.

So, if that’s the case, why would anybody say that Medicare for All is possible?

The answer to that gets us to the second part of the Vermont project, the part that Bernie has never shown any interest in. Medicare for All would work if the health care delivery system costs could be well enough managed to keep the annual cost increases to the level of general inflation in the economy. In current terms, that would be something a little south of two percent.

Vermont’s regulatory apparatus is probably the most rigorous in the country. The Green Mountain Care Board has the power to approve hospital budgets, as well as to approve all major new capital expenditures by the hospitals. It also has the power to regulate the rates that Blue Cross and MVP, a New York-based carrier, can charge for policies sold on the federally sponsored Exchange. And as noted above, the rates so far are closer to sustainable than most.

It is also true, however, that the Vermont program is built on the proposition that just “regulation” will fail to deliver sustainable costs over time. The program, therefore, instructs the Green Mountain Care Board to foster, or oversee, recasting of the delivery system so as to shift reimbursement from fee-for-service to block financing, or capitation. The federal government clearly believes this is necessary—they are doing all they can to encourage a shift to”alternative payment models,” the clearest manifestation of which is fixed-price contracts between payers and groups of providers assembled into an Obamacare gizmo called an Accountable Care Organization (ACO). An ACO is just a baggy sort of company that allows a group of providers, say, a tertiary referral hospital, or two; several smaller community hospitals; and primary care doctors to deliver all the care needed for a big bunch of patients for a fixed price.

The fixed price attacks the engine of cost inflation, which is the total volume of care delivered by a system. All other regulatory schemes are based on unit costs, which can be fixed absolutely, but which are vulnerable to overuse. The payer can decide what it will pay for an MRI, but only the doctors can decide how many MRIs to order, a perquisite they exercise every day. With a fixed price contract, they can perform MRIs until the machines smoke, but they can’t make any more money thereby.

When considered in the light of the Bernie plan to install Medicare for All across the country, Vermont is closer to being in a position to manage that than any other state—by far. Consider: there are roughly 850 ACOs in the country. In 2016, when the feds were pushing the idea of rebuilt financing, they chose 20 ACOs to participate in what they called the ”Next Generation” project.

Of those 20, the only one driving directly at fixed price, capitated financing is Vermont. The implication of that datum is that an infinitesimally small piece of the national acute care system is anywhere near ready for full government financing. And anyone who thinks that moving the national system to a radically different financing structure in a short time is easy is living in a cave. Vermont has been working on it for eight years, and we aren’t there yet.

I have written about the issues involved in that quest for several years. But a highlight reel would include opposition from important elements of the press, the legislature and the primary care doctor community. Throw in a failure by Dartmouth-Hitchock to lead in eastern Vermont the way the University of Vermont has in the west, a reluctance by the Scott administration to lead, a diffident response by the business community, the inability of the small hospitals to cope with modern medicine, egregious foot dragging by Blue Cross, and the half-baked performance of the federal Medicare officials themselves in managing their end. Those are just the highlights…

The Vermont reformers working in the Green Mountain Care Board, OneCare Vermont, the Agency of Human Services, the Vermont hospital association, are pushing ahead steadily on all of these fronts, and they haven’t been stymied yet. At the same time, however, the movement is painfully slow. It is still not safe to shift the Vermont system to full government financing.

And the idea of trying to take the three trillion dollar U.S. system there without completely recasting that system so it could operate in an upside-down financial environment would be governmental insanity. No amount of Bernie ranting can change that reality.