Editor’s note: Anya Rader Wallack is the chair of the Green Mountain Care Board.
Jeff Wennberg wrote an op-ed last week questioning Vermont’s approach to health care cost containment. I genuinely welcome Mr. Wennberg’s involvement in the conversation about cost containment, and I hope more Vermonters will get involved, as this is a critical issue for Vermont and we have big decisions to make.
Reducing the rate of growth in health care costs is essential to Vermont’s future economic health and to our ability to provide high-quality health care to all Vermonters. But this venture is not for the faint of heart — it’s complicated stuff and there are no easy answers.
Contrary to Mr. Wennberg’s claim, Vermont has not chosen a single path toward health care cost containment. We are looking at all the major components of health care cost and the drivers of cost growth to identify interventions that will reduce costs and cost growth without compromising health care quality.
Contrary to Mr. Wennberg’s claim, Vermont has not chosen a single path toward health care cost containment. We are looking at all the major components of health care cost and the drivers of cost growth to identify interventions that will reduce costs and cost growth without compromising health care quality.
A central focus for the Green Mountain Care Board (GMCB) is provider payment. We are exploring several methods for moving away from predominant use of fee-for-service provider payment. Fee-for-service in its current form is widely recognized as contributing to excess health care-cost inflation and not sufficiently supporting services like primary care and care coordination.
For this reason, both the private and public sectors, at both the state and federal levels, are implementing methods of provider payment that it’s hoped will encourage greater efficiency in health care delivery, emphasize primary care and coordination of care, reward higher quality and provide a better patient experience.
One example is the “global payment” system introduced by Blue Cross and Blue Shield of Massachusetts. This was the focus of the Massachusetts attorney general’s study quoted in Mr. Wennberg’s piece. The Blue Cross and Blue Shield of Massachusetts global payment contracts, which were implemented by the insurer without government involvement, have had mixed results and in early evaluation have not been shown to wholly overcome the power of some monopoly providers to garner higher prices than others.
This is disappointing, but probably less significant than the more general conclusion reached by the AG regarding the lack of transparency or rationality in provider-insurer contracting in Massachusetts. According to her report:
The complicated structure of risk contracts currently in place in the Massachusetts market makes it difficult to compare payments made under those contracts. Each risk contract has multiple components, such as infrastructure payments, quality payments, service carve-outs, unit price adjusters, mandated benefit adjusters, individual stop-loss provisions and other factors that are each negotiated and vary significantly across provider contracts.
These components confound efforts to understand and compare how health insurers pay providers. None of the three major health insurers could provide us with health status-adjusted budget information comparing the providers in their networks that they pay under a global contract.
In other words, none of the health insurers routinely and systematically evaluates how the global payment contracts that they have with various provider organizations compare to each other. This convoluted payment methodology makes it difficult for regulators, market participants, or others to make valid comparisons of provider rates or valid conclusions about the effects of global payment contracts and further complicates the ability of providers to contract for value-based, market-appropriate prices. Health insurers should pay providers using standardized payment methodologies that allow providers to value the risk that they hold and so stakeholders can make valid comparisons of provider global rates.
We should be able to do better in Vermont, in terms of transparency, understandability and effectiveness of payment reforms. We are testing several new models of provider payment, all of which share a common framework — move away from volume-driven payment and align incentives for all providers to improve quality and eliminate unnecessary cost, reduce complexity and increase transparency. The models Vermont is, or soon will be, testing include:
• Targeted enhanced payments for primary care, care coordination and quality performance. The Blueprint for Health is an example of this approach, as is a payment reform pilot the Green Mountain Care Board approved last week related to oncology services. In each case, providers get an extra payment for providing better care. There are examples of this kind of pay-for-performance working to improve care and reduce avoidable costs around the country.
• Bundled payments for episodes of care. This methodology, which is in use by some of the nation’s leading insurers and is being piloted by Medicare, includes a single payment for all care associated with a diagnosis or procedure for a given period of time, for example 90 days. The idea is to encourage better management of care within that time frame by monitoring quality and allowing providers to share in “savings” from more efficient and effective care delivery, such as reducing repeat admissions to the hospital. So far, we have had some interest in this model from physicians who see the need for much better coordination between primary care physicians, specialists, hospitals and, in some cases, nursing homes and home health.
• Global hospital/physician budgets. This is a tough time to be running a small rural hospital. The core of your business is precisely those services that don’t pay well under current fee-for-service schedules. So we are working with a couple of hospitals to introduce a payment arrangement whereby they would get paid what they have been paid in the past — with an adequate inflation rate — essentially as a lump sum. This would allow the hospital to focus on its core services, be confident in serving its community’s needs and stop worrying about the need for greater fee-for-service volume to pay the bills. This method has been used in Maryland, for some hospitals, with good success.
• Population-based payments to “accountable care organizations.” This approach involves a single payment to a health care organization for the total care needs of a group of people. There are many examples of these kinds of payments, even in Vermont, but they have not been the holy grail of quality improvement or cost control. Our conversations about how they might work, going forward are focused on how to better measure quality of care and patient experience and how to assure that provider payments under these risk arrangements align incentives for quality care and appropriately allocate the burden for managing costs across various providers.
In all cases, we are testing these methods, as the Legislature directed us to do, and will not scale them up until they have proven successful. The multitude of approaches might seem confusing, but it recognizes that, while all of these methods show promise, none have been shown to be a “silver bullet” in simultaneously controlling health care cost growth and improving health care quality.
Our entire health care system is about the size of a small HMO in another state. Our hospitals all are non-profit. There is very little provider competition, but there also is very little “scale” — we replicate a fairly broad array of services in most corners of Vermont. These factors may influence the effectiveness of any of these models for achieving our goals.
Moreover, Vermont’s health care market is very different from that in most of the U.S., so while experience elsewhere can be instructive, it is not entirely generalizable to Vermont’s situation. Our entire health care system is about the size of a small HMO in another state. Our hospitals all are non-profit. There is very little provider competition, but there also is very little “scale” — we replicate a fairly broad array of services in most corners of Vermont. These factors may influence the effectiveness of any of these models for achieving our goals.
In addition, with any of these models, which create incentives for provider consolidation, collaboration and development of economies of scale, we have to worry about two important issues:
1) What is the best way to assure fair prices when you are dealing with consolidated provider power? Perhaps surprisingly, Americans tend to actually use fewer health care services than people in other industrialized countries, but we pay much higher prices for the services we buy. Therefore the price of services is a real concern, particularly in a non-competitive market.
2) How do you assure appropriate access to community services while simultaneously encouraging greater efficiency and economies of scale? We can’t have every service in every community in Vermont, but we do want to make sure that primary care is strengthened in every community and that the division of service delivery between local and regional hospitals is driven by concerns of quality and access and not solely efficiency.
One last point: Mr. Wennberg suggests that we are emulating the Canadian provider payment system (at the same time that we are emulating Blue Cross and Blue Shield of Massachusetts, no less). Canada, however, pays physicians on a fee-for-service basis, a fundamental difference between the Canadian system and the approaches being considered here in Vermont.
