Editor’s note: Hamilton Davis is a health care columnist who writes for VTDigger.
[O]ver the past few months, Vermont’s health care reform project has been shifting from the theory and infrastructure building phase to actual execution. The financing side of Gov. Peter Shumlin’s single payer plan died last year, but the cost containment component seemed on track. The execution of the cost phase, however, isn’t going well at all.
Exhibit A for that conclusion is the bill now before the Legislature that would require a hospital that acquires an independent doctor practice to notify the state as well as the practice’s patients of that fact. The measure also carries a suggestion that such an acquisition might violate federal anti-trust laws.
The bill was proposed by Sen. Tim Ashe, the chair of the Senate Finance Committee.
By itself, the bill doesn’t amount to much — OK, just tell the state and mail the patients a letter. But the whole caper is so wrongheaded that it is hard to know where to begin talking about it.
So, what’s wrong with it?
- The whole premise of the bill stands directly counter to the Vermont project.
Ashe’s thrust is based on the idea that independent practices must be preserved in Vermont. When he introduced a similar bill last May, he told VTDigger’s Morgan True that such practices were an endangered species. They are being “gobbled up” by the academic medical centers, he said, “with the end result of increasing costs to the health care system, without adding any additional value.” (emphasis added)
The first and most obvious problem is that the Legislature has ordered the Green Mountain Care Board to get costs under control and everyone involved understands that to do that you must move from fee-for-service reimbursement to block financing. And you can’t get to block financing with independent providers.
- The movement of a medical practice, especially a primary care practice, inside a hospital may cost a little more, but the comment that it adds no value is wrong to the point of being irresponsible. The reality is that primary care practices are often so shaky financially that being acquired by a hospital is the only way to survive. If every primary care practice had to stand on its own financial feet, we would have a medical catastrophe in Vermont.
An example: A few months ago, Mousetrap Pediatrics in St. Albans announced that it would leave the state, leaving some 6,000 families in northern Franklin County with no care for their kids. Northwestern Medical Center in St. Albans stepped in and acquired the practice. Problem solved.
The reality: Most of these kinds of transactions have nothing to do with gobbling. They are rescue missions, and they usually cost the hospitals money. Nobody makes money on primary care.
- Because of the growing recognition that the only long-term solution to cost containment is block financing, the state’s cost containment strategy is built on the foundation of integrating the state’s delivery system utilizing an Accountable Care Organization (ACO), which is a component of the federal Obamacare law. For the last three years, it was possible to have independent practices inside an ACO. Going forward from here, it is not. Adopting the Ashe posture would derail the whole reform plan in the state.
- The suggestion in the Ashe proposal that Vermont doctors and hospitals might have antitrust problems is a red herring. Vermont hospitals have been buying practices for years without anti-trust issues. More important, the centerpiece of the ACO law is a waiver from the federal antitrust laws. OneCare Vermont, which includes the two academic medical centers as well as all but four of the smaller hospitals in the state, has been selected as the statewide ACO by the federal government so it is doubly immune to anti-trust threats.
And, contrary to what you might expect from reading the Ashe proposal, the movement of practices into hospitals runs across the whole system, not just academic medical centers.
Porter Medical Center in Middlebury, for example, has bought a dozen to 15 practices over the last several years. At least 10 of those were primary care practices and they are a major factor in the Addison County area. They may have also been a factor in the financial difficulties that Porter has experienced recently.
- Finally, the movement of medical practices has been strongly encouraged by the budget strategy of the Green Mountain Care Board. For the last three years, the board has measured hospital budgets against an inflation cap of around 3.5 percent.
At the same time, however, it permitted hospitals to exceed the cap if the money was to be spent for things that advanced the cause of health care reform. A major category that met that test was the movement local medical practices into the local hospital.
This principle had two signal benefits. The first was that it brought the acquired practice into the hospital, so that its spending could be captured and regulated; independent doctors are not now regulated, although the Green Mountain Care Board has the authority to do so.
The major benefit, though, is that primary care practices can survive much more readily in the hospital rather than outside it.
If it is true that the Ashe bill fails about every test of relevance one can think of, the question is: What is going on?
I’ll begin to deal with that in my next column.
