Editor’s note: Hamilton E. Davis is VTDigger’s health care columnist.
[T]he recent news conference staged by Gov. Peter Shumlin and Green Mountain Care Board Chair Al Gobeille ranged over the whole Vermont health care reform landscape and in the process illuminated the cracks and crevices and piles of bureaucratic detritus that mark the path the state has followed over the last four years.
One of the many such cracks is the question of accountable care organizations that has bewildered the Legislature for more than a year. What exactly is such a thing, and how does it work? Can there be more than one ACO in the state? And what should the Legislature, not to mention anybody else, think about it?
Good luck figuring it out if you listen to the news conference, but it’s actually not that complicated in theory. How well it will work out in practice is a much chancier proposition. Here’s the short version:
An ACO, generally speaking, is just a group of health care providers who join together to deliver care to people. The joint venture will look like a company, but one in which the elements aren’t owned by a single entity. Obamacare permits them to operate like a company and link their financing without triggering federal antitrust prohibitions.
These proto-companies fall into two basic categories. In the first category are ACOs that get paid for their work by payers like Medicare, Medicaid or private firms on a fee-for-service basis. There is no real limit on the number of such structures that can operate in an area. The members simply total what they got paid in the previous year, add an increment for inflation, and establish a target for the following year.
If their costs come in under the target, they get to keep some of the savings. If they don’t meet their target, they don’t suffer any penalty. These efforts are called shared savings programs, and they represent the first phase of the effort by the federal government to encourage cost containment across the country.
The easiest option for the ACO is a straightforward cost target. Using a fee-for-service reimbursement pattern, they can adopt more stringent requirements that might include quality or other service measures that also have to be met, in addition to spending. The feds accept three levels of discipline on the fee-for-service platform.
The first three levels of ACOs have been in place for three years, and it is fair to say they haven’t done very well. Lots of providers in Vermont and across the country have begun to get used to more cost and quality discipline, but very few ACOs saved much money. Moreover, it was clear that it was mainly a crap shoot: Costs go up regularly, but the question is how much, and an ACO might make a little money if it guessed right. But nothing really changed in the delivery system.
Now the feds have established a new category that departs dramatically from the three levels of efforts built on fee-for-service platforms. They call it the next generation, and it is key to whether Vermont or anyone else can actually wrestle their health care costs onto a new trajectory. It calls for shifting from fee-for-service to block financing, and is orders of magnitude more difficult to manage.
An ACO in the new world has to both look and function like a real health care company. It can’t have just any old collection of providers; it has to have within its structure a full array of medical services, from primary care to speciality care in small hospitals to the very sophisticated care delivered in big hospitals and academic medical centers.
And this structure now faces a much greater challenge to succeed. It will have to commit to delivering comprehensive medical services to sizable blocks of patients for a specific price per person per year. And the ACO and its provider components will have to “take risk” for their performance. If they come in under their cost target, they still get to keep a chunk of it. If go over the cost target, however, the loss has to come out of their own hides. They can also lose if they do OK on costs but badly on the quality measures.
In the Vermont context, there is another consequence to moving to the leading edge of the reform movement. Whereas you could have multiple ACOs in a fee-for-service environment, in block financing there is room for only one ACO in Vermont.
The reason is that Vermont is so small there aren’t enough medical services here to make up two. Boston could support four or possibly even more. Vermont has enough for only one.
That takes us back to the Shumlin-Gobeille news conference, and hence to the specific Vermont situation. On numerous occasions, when representatives of the Green Mountain Care Board have been asked whether there could be more than one ACO in the state, they have said yes. That has been true in the past and could be true in the future.
But it is emphatically not true in the next-generation environment, where the reimbursement shifts from fee-for-service to block financing — also called capitation or population financing. And Vermont is committed to precisely such a course.
Block financing is built into the warp and weft of Act 48, the health care reform bill passed in 2011, and Shumlin and the Green Mountain Care Board chair spent the whole first portion of the news conference reiterating that commitment. The Vermont system, Shumlin said, was broken and could be fixed only by moving beyond fee-for-service reimbursement.
So, for the past year, the correct answer to the question of multiple ACOs in Vermont has been no.
Financing is linked to another critical question. If there can be only one ACO, what should it be? Should it be one of the ones now operating? Should we combine them? Or invent something new?
To consider that question we need to look more closely at the ACO landscape as it exists now.
For the last few years, there have been three ACOs in the state. The smallest is called Healthfirst; it is a grouping of stand-alone primary care doctors, along with a handful of specialists not based at hospitals. Healthfirst has operated a shared savings program, but its spokesperson told the Legislature last fall that it will not participate in that program in the future.
The second is called Community Health Accountable Care. It is a much larger conglomeration of primary care doctors organized into federally qualified health centers. These groups get some financial assistance from the federal government, which partly makes up for the fact that primary care doctors make far less money than specialists, especially those working in rural areas. This group may be enhanced in the future by four small hospitals in eastern Vermont. CHAC has run a level one shared savings program for the last three years. It has not said what it intends in the future.
The third ACO is called OneCare Vermont. It is by a very wide margin the largest. It is anchored by the University of Vermont delivery system in the western part of the state and Dartmouth-Hitchcock Medical Center on the east, and it includes community hospitals in Berlin, St. Albans, Morrisville, Middlebury, Rutland, Bennington, Brattleboro, Windsor and Newport.
This aggregation contains of more than 90 percent of all the medical assets in the state, but for the purposes of our discussion the most important fact is simply that it is the only entity with the resources needed for a statewide ACO. By any measure, OneCare Vermont is the only entity now in place that can possibly get to block financing.
No knowledgeable person denies this reality. Both small ACOs have signed a memorandum of understanding acknowledging that there can be only one ACO in the state. CHAC and Healthfirst could, if they chose, continue to offer shared savings efforts, but it is unlikely any buyer would want it. And in any event, neither organization has said anything about trying to operate an ACO on its own.
Finally, the federal government has already designated OneCare Vermont as one of 20 or so ACOs in the U.S. to lead the way to block financing. OneCare is now preparing its block financing product for introduction Jan. 1.
If all the above is true, then why is there so much sheer misunderstanding in the Legislature about this issue? The answer lies in the fact that the Shumlin administration and the Green Mountain Care Board have bent themselves into pretzels to avoid talking about the issue.
Whenever a legislator asks, and they have asked often, “Can there be more than one ACO?” the answer has almost always been yes. Just plain yes. Occasionally, as in the recent news conference, the discussion may wind its way around to a statement that only one ACO can “take risk,” or some other euphemism. But it was striking that in the Shumlin-Gobeille news conference the word “OneCare” was never mentioned until a reporter asked about it late in the questioning. And in the wake of the news conference, it became clear that many important legislators don’t get it at all.
For example, in the Senate Finance Committee, which has been a major player in health reform since its inception in 2011, Sen. Richard Westman, R-Lamoille, mused in a hearing on the issue that maybe we shouldn’t have a gizmo like an ACO; it sounded to him like just putting a layer of bureaucracy between the patient and the payer. Westman’s take was problematical at several levels, but the point is why there remains so much confusion about the issue.
So, why have the administration and the board labored so hard to avoid talking about the issue?
The reason is that for the last year, restructuring of the health care system — which will be required if block financing is to be implemented in the state — has been bitterly opposed by two important groups: the leaders of several of the small hospitals in the state, who feel their roles will be diminished by reform; and a group of social service agencies that have been striving to use their political strength to draw more money to their organizations by taking it away from the much-better-financed hospitals.
Both groups have been lobbying the Legislature and especially the Green Mountain Care Board to maintain the fiction that, going forward, CHAC and Healthfirst are ACOs just as much as OneCare is.
A major driver of that campaign is an effort to foster a virulent dislike of the UVM system. This dislike has spread extensively through the Legislature to the point where it is endangering reform itself.
I’ll look at this whole issue in more detail in my next column.