[T]he University of Vermont Health Network is committed to health reform, its top officials told regulators at a hearing on its 2016 budget proposal Tuesday.
The regulatory Green Mountain Care Board will hear from all 14 of Vermont’s private hospitals this week as part of its consideration of budget requests. The hospitals are seeking a combined 3.6 percent, or $80.2 million, increase in patient revenue next year. The board must approve hospital budgets by Sept. 15.
More than half of that money, $57 million, is for the UVM Health Network, which includes Burlington’s UVM Medical Center, the state’s largest hospital, and Central Vermont Medical Center in Berlin. It also owns two hospitals in northern New York that aren’t regulated by the board.
The network’s CEO, John Brumsted, says his organization is committed to having “80 percent risk-based payments by 2018.”
That means 80 percent of the money UVM Health Network receives from government health care programs (mostly Medicare and Medicaid) and private health insurance companies will be in payments based on the estimated cost of treating a particular condition or patient population.
The idea is to reduce health care costs by moving away from fee-for-service medicine in which providers are paid separately for each service or service component (the doctor’s time, the drugs used, etc.), while also maintaining or improving care quality.
One example already happening in Vermont are shared-savings programs, in which a government program or health insurer (a “payer” in health policy parlance) offers providers a set payment for meeting quality standards for the care of a predetermined patient population. Money saved is split between the payer and the provider.
While this is not the case currently, the future shared-savings programs will require that money spent on care in excess of the estimate be returned to the payer — putting the “risk” in risk-based payment.
The UVM Health Network participates in shared-savings programs with Medicare, Medicaid and Blue Cross Blue Shield of Vermont, the state’s largest health insurer, through the provider network OneCare Vermont (often called an accountable care organization or ACO).
There is some evidence that shared-savings programs are improving the quality of services in Vermont. The UVM Health Network and other providers are investing in case managers and better IT systems to make sure patients aren’t falling through the cracks and winding up back in the hospital. OneCare’s quality performance scores in Medicare’s shared-savings program increased an aggregate 6 percent from 2014 to 2015, Brumsted told regulators.
When care is better managed, patients are less likely to be admitted back into the hospital for the same problem, which is especially important for people with chronic illness who are likely to need lots of care under the best circumstances. The desired result is “cost avoidance,” or essentially saving money by being proactive in addressing patients’ needs.
Health care providers in the U.S. earn their money by treating people’s health problems, and reformers want the industry to earn money by preventing problems from developing — or keeping patients healthy.
But no one is suggesting any of the current health care reform initiatives will make medical services less expensive than they are now.
Is health reform making health care more affordable?
In fact, the rosiest scenario offered by hospital officials and state health care regulators is one in which the annual growth in health care spending falls into step with inflation in the wider economy.
Asked if reform efforts are saving consumers money, Brumsted replied, “At this point it’s tough to tell.”
The rate increases the UVM network is seeking from private insurers are much smaller than they were just a few years ago, he said. The smaller increases should mean less growth in premiums, he added. Nearly half of the 6 percent rate increase the UVM Health Network has set for commercial insurers is necessitated by payment rates from government programs, which Brumsted said have not kept pace with inflation.
Critics of the path health reform is taking in Vermont say there’s another factor keeping costs high: the consolidation of medical providers into ever larger networks. That consolidation happens when hospitals, health centers and clinics or physician practices join a network.
There is vigorous debate in health policy circles about the impact of consolidation, but the trend for private physician practices, in particular, has been consistently toward hospital employment. A network offers economies of scale, and a reprieve from the administrative demands of running a practice. The number of physicians employed by Vermont’s hospitals grew 22 percent between 2007 and 2012, from 947 to 1,207, according to figures from the Green Mountain Care Board.
The largest network with the most physicians in the state is the UVM Health Network. In March, Central Vermont Medical Center acquired Granite City Primary Care in Barre.
Brumsted does not use the word consolidation to describe his network’s absorption of medical practices, instead he refers to greater integration. The more providers working within a standardized network, using the same IT systems and following the same protocols, the more efficiencies can be gained — improving patient outcomes and lowering costs over time, he says.
There are signs the path of greater integration, or consolidation, is losing favor with some health care providers in the state.
“Just because you consolidate, doesn’t mean you’ll save money,” said Joseph Woodin, CEO of Gifford Health Care, a smaller network that includes a hospital in Randolph and a community health center with several locations in central Vermont.
“You’re not joining a cheap, value-based organization — you’re joining organizations that are already expensive,” he said.
Gifford Medical Center recently left OneCare, the ACO largely supported by UVM Health Network and Dartmouth-Hitchcock (Brumsted told regulators Tuesday that the two have spent $15 million on OneCare operations). Springfield Hospital, Northeastern Vermont Regional Hospital in St. Johnsbury and the Community Health Centers of the Rutland region have left OneCare in the past several months as well.
All four have joined Community Health Accountable Care, a smaller ACO that mostly represents Vermont’s community health centers. Woodin said Gifford chose to leave OneCare because it was too heavily centered around the specialty care offered by its two academic medical centers.
That care is part of the reason academic medical centers are “expensive” organizations, and Woodin acknowledged that if he was in need of complex medical services he would want to be treated at an academic medical center. But in the context of health care reform efforts “it better have a foundation of primary care, not tertiary or acute care,” he said.
Woodin’s characterization is one that Brumsted and other OneCare members would likely dispute. The UVM Health Network CEO spent time Tuesday assuring the Green Mountain Care Board that OneCare and his organization are committed to bolstering primary care within their network.
The dominant player
UVM Medical Center is the “dominant player” in Vermont health care, according to a 2014 Green Mountain Care Board report. Its market share — one-third to one-half depending on how it’s calculated — and its role as the state’s only specialty care center, give it greater power in commanding prices from insurers, according to the report.
Hospital networks bill for their overhead even in outpatient settings, such as off-site physician practices they’ve acquired. Independent physician practices and other small providers are “price-takers” when it comes to what they’re paid by commercial insurers, the report found.
Connecticut, which has its own dominant player in the Yale-New Haven Medical Center, passed a law this year aimed in part at making consumers more aware of this disparity and taking steps to shore it up. Next year, billing statements must identify the “facility fee” and include an explanation that facility fees cover a hospital’s operational expenses, according to a Connecticut Mirror report.
Patients must also be informed that they might have paid less in a nonhospital venue, and must be alerted to their right to request a reduction in the fee. In 2017, Connecticut hospitals will no longer be able to charge facility fees for certain outpatient services.
In a March presentation on the principles underlying Connecticut’s health reform priorities, that state’s Senate president pro tem and minority leader write that large health systems with increasing market power are driving up prices for consumers and payers alike.
Healthfirst, a trade group representing roughly 40 independent physician practices in Vermont, says it’s preached the same message in Vermont since its inception, with less encouraging results. During that time “not enough has been done to address this issue,” said Amy Cooper, Healthfirst’s executive director.
Healthfirst mounted an effort to level the playing field, as they see it, through the Legislature last year, pushing for a law that would require private insurers to pay all providers the same amount for the same service. Their so-called “pay parity” provision was considered too divisive by lawmakers. Instead, Act 54, the 2015 health reform bill, includes a provision requiring insurers to submit to regulators a plan to make payments “fair and equitable” to all providers.
Brumsted, the UVM Health Network CEO, said he doesn’t believe that care is more expensive at hospital-owned practices, and maintains that the efficiencies his network is creating will eventually reduce costs to consumers.
“I’m in no way admitting that there’s an increased cost to care because you get your care from a system as opposed to a solo practitioner,” he said. But Brumsted said he does believe that facility fees are reasonable. “If there’s a true facility cost, that has to be covered by a reimbursement or it’s another form of cost shift — somebody else is going to have to pay for that.”
“Ultimately if we reduce the cost of care for those folks that would otherwise be real expensive to take care of, then that will ultimately come back and reduce commercial insurance increases year over year, and it should also accrue to state and federal government,” he said.
