Editor’s note: Hamilton E. Davis is a health care columnist for VTDigger. This piece also appears on his blog, A Vermont Journal. Davis is an author, journalist and health care expert. He has served as a state representative, ran the Vermont Hospital Data Council in the 1980s and worked for Fletcher Allen Health Care, now UVM Medical Center.
[T]he scene is the cramped, ornate meeting room of the Vermont Senate Health and Welfare Committee. The time: a few months ago. The committee is holding one of its interminable hearings on the state’s health care reform projects. The witnesses are an extensive array of the usual suspects.
Late in the proceeding, John Michael Hall, the executive director of the Champlain Valley Agency on Aging, slides into the witness chair. Hall’s organization is one of several that operate on the dividing line between social service and acute medical care. They serve people with mental illness problems, drug addition, housing issues and the like. Most of their money flows from the state Medicaid office. These agencies are concerned to improve their funding streams as reform reshapes the system.
Hall talked briefly about his agency’s needs, but then he offered these remarks about the structural difficulties ahead:
The real problem we have is that there is one huge fish out there and it is gobbling up all the little fish and every once in a while, a piece of food drifts down to the bottom.
The chair, Sen. Claire Ayer, a Middlebury Democrat, perked right up when she heard that.
I think you hit the nail on the head right there. That’s what we’re hearing around here.
You might think that testimony about a huge fish gobbling all the little fish in the health care delivery system might excite some comment, but you would be wrong. Nothing more was heard that day about the huge fish.
What was clear to all the insiders, however, is that the big fish is the University of Vermont medical system. And the comment was one of the few public manifestations of a vicious battle over the shape of Vermont’s hospital-doctor system that has surged back and forth over the last year or so, and which is headed for some kind of resolution by the first of June.
The central issue is how to integrate the system so that Vermont can begin to shift from the fee-for-service payment system that has driven explosively rising costs over the last half century to a new payment structure, where a group of hospitals and doctors provide health care to a group of patients for a fixed per person annual price, a reimbursement system know as “capitation” in the health biz.
The negotiation for the specific price would be overseen by the Green Mountain Care Board. The essential characteristic of such a structure would be that, for the first time in American medical history, providers — doctors and hospitals — would take responsibility for the financial performance of their system. Once they agreed on a price, they would get to keep some of savings, if there were any. If their actual costs went over the target, they would have to make up at least some of it themselves. Such a system is described as providers taking “risk.”
The legislative framework for the process described above has been in place since early 2011, when lawmakers passed Act 48. Since that time, there have been hundreds of hours of legislative back and forth about the reform effort. Until about a year ago, however, much of the public, press and legislature has been focused on other aspects of the reform project , particularly the part of the program that called for transferring the source of funding for the system entirely to the state’s tax base. Gov. Peter Shumlin dumped that aspect of reform, a single payer system, in late 2014.
The second major element of reform cost containment, however, has moved steadily along since the Green Mountain Care Board, established under Act 48, began full-scale operations in 2013. The cost containment effort had two thrusts—to regulate hospital spending in the current fee-for-service system, and to restructure the delivery system so that it could shift away from fee-for-service to block financing and provider risk.
About a year ago, the board, along with the rest of the delivery system, began to grapple with the actual details of the restructuring question. The theory is clear enough: No regulation has ever succeeded in controlling costs in a fee-for-service system. There is also something close unanimity in the health policy biz that capitation is the only way to do it.
You might think that such a consensus would ease the path to a new system. You would not just be wrong. You would be deluded. Restructuring the Vermont version of the American medical system has turned out to be nightmarishly difficult. To see why, you have to strip the structure down to its component parts and try to find the winners and losers, to trace the interactions among the players.
Here is the program for the game:
THE GOVERNMENT SIDE
- The Green Mountain Care Board. The board is the center of action for health care reform. It has an exquisitely difficult job because it must accomplish two very hard things, not just one. The first is it has to regulate costs now, and at the same time oversee a total restructuring of the delivery system operations and reimbursement.
- The Shumlin Administration. In 2011 Governor Peter Shumlin put forward a brilliant plan to reform health care; he also put in place a very strong team to execute it. The Legislature bought in unreservedly, and everything went well for the first two years.Then it all began to go south and in late 2014. Shumlin gave up on the financing side of health care reform, and gave up on his political career shortly thereafter. The administration has had no influence on reform for the last year, and it isn’t going to have any for the rest of Shumlin’s term. Given that a new administration won’t get on track until spring 2017 at the earliest, the health care reform effort will have to proceed with no political cover for at least a year, and possibly more. That will be very challenging.
- The Legislature. A major reason for the last conclusion is that in the absence of a strong executive branch committed to reform, the Legislature is left adrift, and subject to all sorts of freelancing. That is bad enough given that the Legislature has only the most tenuous grip on the technicalities of health care delivery; it is much worse when legislators are tempted to begin running the program themselves.
- The State Medicaid Program. The Medicaid program is run by the Department of Vermont Health Access. It deserves to be considered separately from the administration because it has two complex functions. The first is that it is responsible for the federally financed health insurance exchange; the second is that it runs the overall, non-exchange Medicaid program.The cancer that killed the Shumlin administration began here, and the whole situation is still a nightmare. A major reason is that Medicaid spending is playing havoc with the state budget. In the whole landscape, no element needs cost control more than Medicaid.
- The Centers for Medicare and Medicaid Innovation AKA, the feds. CMMI has already selected Vermont as the leader in finding the way to capitated financing. They work almost daily with the Green Mountain Care Board, and they will have an important say in how health care reform plays out.
THE OTHER PLAYERS
- The ACO. The key structural element in the project is OneCare, the accountable care organization in the state. In order to have capitated financing, you have to have an organization that can deliver a full range of medical care to a large block of people for a single price. If all or most of the medical resources in the state were owned by a single entity, that entity could do it.That is not the case in Vermont, and under federal law the only substitute for it is an ACO, which is designed to act like a somewhat loosely organized company; the key difference between an ACO and a normal company is that federal law waives its price fixing prohibitions.
OneCare was formed in 2012 by the University of Vermont Medical Center, Dartmouth-Hitchock Medical Center in nearby New Hampshire and all the remaining hospitals in Vermont, although four small hospitals subsequently withdrew.
On paper, there are two smaller ACOs, but neither has any capacity to build an integrated system, and thereby move to capitated reimbursement. Structurally, the two small ACOs are irrelevant. Politically, they are highly relevant. Actually, more than relevant, as we’ll see below.
- Primary Care Doctors. The same federal law that made capitation possible through an ACO dramatically elevated the standing and role of primary care physicians. Primary care docs have been the menial laborers of the American medical system. They get paid less, often far less, than other doctors, and for years they just haven’t gotten much respect. Specialists are the princes of the realm. That is about to change a lot.Obamacare, the federal health reform law, gives primary care doctors control of the entry portal to the ACOs. The only way any patient can get his or her care from an ACO is to be referred into it by a primary care doctor. Those patients are called “attributed lives,” and without enough of them you can’t operate an ACO. Hence, the increase in stature. In fact, primary care doctors have always been essential to the system; they just seldom got paid, or treated, that way. Now they will get paid much more and get treated with considerable deference.
- CHAC Community Health Accountable Care is the political arm of a large number of primary care doctors who get some federal financing help from the Federally Qualified Health Centers program — FQHCs. Several Vermont hospitals employ primary care doctors, but CHAC represents just under half of the potential attributed lives for the ACO.CHAC also is associated with a bigger organization, Bi-State Primary Care Association, which encompasses primary care in Vermont and New Hampshire. The political leverage for primary care in Obamacare did not escape the notice of CHAC and Bi-State.
- HealthFirst. HealthFirst is a smaller interest group representing independent physicians. Some are specialists, some primary care. HealthFirst’s primary care docs number somewhere around 60 or 70. Despite its relatively small size, it has played an important political role over the last year.
- The Designated Agencies. The designated agencies are quasi-independent groups that serve Vermonters who have both social and medical needs — people with mental health issues, problems with alcohol and drug abuse, and with more generalized problems like poverty and inadequate housing. Howard Mental Health in Burlington is a prime example.They present a very difficult governmental problem: The needs of their clients are something close to limitless, while their funding streams are tightly constrained. You might have a homeless, late-middle-aged man with mental health, drug and alcohol addictions. He needs treatment for all of these, plus chronic acute physical health care problems. Good luck getting a grip on the cost of social and medical resources needed to adequately treat this man.
At the same time, there is a consensus among Vermont policy makers that the more progress you can make on getting his social problems under control, the less we will have to spend on his acute medical care.
The DAs spend somewhere around $500 million a year, most of it coming out of the Medicaid budget. That is very approximate. Getting hard, recent numbers out of the Medicaid operation requires a heroic journalistic effort. What I think is critical in this area is that if the DAs had adequate financing their spending would double in six months.
- Small Hospitals. Vermont’s hospital structure is wildly skewed for a state of 626,000 people. It is served by two medium sized academic medical centers, the University of Vermont system based in Burlington, and Dartmouth-Hitchcock Medical Center in nearby New Hampshire. There are fairly sizeable community hospitals in Rutland, especially, and Bennington, but the remaining 10 are quite small.How basic reform affects this structure is hugely important to the smaller hospitals, and several of them are significant players in the reform political landscape.
- The University of Vermont Health Network. UVM dominates the delivery of health care in Vermont. UVM delivers nearly half the total care in the whole state as well as a big chunk of care to Northeastern Vermont. The only comparable entity is Dartmouth-Hitchcock, which delivers much of the high-level care east of the spine of the Green Mountains.UVM is often thought of as mainly a tertiary care facility, delivering the bulk of Vermont’s need for advanced treatments like open-heart surgery and care of complex cancers. In fact, however, UVM also operates a community level hospital that dwarfs any other in the state. People in Chittenden County as well as Grand Isle County and residents of southern Franklin, eastern Washington and northern Addison counties get much of their secondary care in Burlington. UVM’s traffic involves something around a third of the state’s population.
In addition, UVM operates a medical school that supplies the state with a large percentage of its physicians.
The relationship between UVM and the rest of the medical community is one of the most fraught issues in Vermont as the state pursues broad-scale reform.
The Action
The central reform question is whether Vermont can shift its medical financing from fee-for-service to capitation. The only way to do that is to tie hospitals and doctors together so they can cooperate rather than compete. And the only possible vehicle for that is a statewide accountable care organization.
The focus of reform for at least the last year has been getting OneCare Vermont to that level. The immediate question is whether the CHAC primary care doctors would join OneCare; a lesser but still important issue is whether the HealthFirst primary care docs would come in.
In approximate terms, the total number of primary care doctors involved is 700. Around half of those are already in OneCare; CHAC represents around 40 percent, or just under 300, while HealthFirst has about 10 percent, around 60 to 70. There may be some independent primary care docs outside this grouping, but there aren’t many.
For the last year, OneCare, CHAC, and HealthFirst have been negotiating over how they might reformulate themselves as a single statewide accountable care organization. Representatives of the three, along with some of the other players, have been meeting every Monday morning — a total of well over 100 hours of discussions. They have come to no decision yet, but they will have to decide soon.
For the first six months of or so, the “issue” was whether the smaller players could trust Todd Moore, the president of OneCare and indirectly, whether they could trust UVM and its CEO, Dr. John Brumsted.
The roots of this question appear to lie in the shutting down of Vermont Managed Care, a UVM-led entity that was paying primary care doctors a premium over what they had been getting previously. Vermont Managed Care closed in the wake of the passage of Obamacare, and the primary care docs’ pay, minus the premium, reverted to Vermont Blue Cross Blue Shield levels.
Meanwhile, several of the players mounted an effort to paint UVM as the bad guy in the Vermont system. UVM is trying to grab all the care for itself, they claimed, and in the process is damaging the small hospitals that are much less expensive and are more patient friendly, with even better quality.
This narrative is patently false, but it has been wildly successful politically. Witness the interchange at the beginning of this piece where a Designated Agency official describes UVM as a big fish that is “gobbling up” all the little fish. The “gobbling” theme has been articulated regularly by Sen. Tim Ashe, the chair of the Senate Finance Committee. And as Sen. Claire Ayer noted, the theme has been adopted wholesale by the Vermont legislature.
The obvious purpose for this campaign is twofold. The first is to get a governance structure for an expanded accountable care organization that sharply constrains the influence of UVM in the decisions that have to be taken to achieve a restructuring of the system. The second is to gain access for the smaller players to the UVM’s financial resources.
The smaller players — CHAC and the DAs in particular — are on the verge of succeeding in the first goal, building a governance structure that ties UVM hand and foot. I’ll lay that out structure out in my next column, but the parties have all agreed with it so far — OneCare, UVM, the DAs and, apparently the Green Mountain Care Board itself. The board has not acted on it formally, but the whole Monday morning negotiating operation has been overseen the board staff.
The second goal — getting at UVM’s money — has been driven by a coordinated effort by CHAC and the DAs. From the outset, CHAC has insisted that it will withhold its participation and thereby block access to their attributed lives unless the Designated Agencies are made full participants in the process. Which means that if OneCare reaches full maturity as an ACO, then the needs of the DAs will have as much call on medical resources as cardio-thoracic surgery or any other medical discipline.
What is not clear at this point is the question of whether CHAC and the DAs have overreached politically. They have succeeded, I suspect, beyond their wildest dreams, in riding their anti-UVM campaign to something like full control of the political environment.
The reality nevertheless is that UVM is going to be — by a huge margin — the dominant player in Vermont, by virtue of its size, its high quality and its lowest cost on a population basis. There is an ocean of data to support this judgment, and although UVM has evinced no ability to defend itself or to tell its own story, the possibility remains that its leadership could get sick of being a punching bag for the marginal players in the system.
And as a practical matter, CMMI, the feds, have opened up just such a prospect. In their regular discussions with the Green Mountain Care Board, the feds have suggested that it might be better for OneCare to start out slowly rather than try to achieve full statewide primary care coverage by next January, OneCare’s go-live date.
The other risk that CHAC, HealthFirst and the Designated Agencies are running is that UVM could not only decline to function as a doormat any longer; it could actually use its size and medical influence more aggressively. For example, OneCare could enter into a risk contract for, say, all the state employees and it could pick just the primary care doctors it needs to service the contract and pay those doctors significantly more than they make now.
So, the lineup of decisions:
I. Do the CHAC and HealthFirst primary care docs come into OneCare?
II. If they do so, OneCare will get a new name, but will UVM sign onto the governance structure that has been worked out over the last year? Going forward from there, will the new ACO be able to make the medical decisions needed to contain costs in the face of the kind of political pressures that are sure to arise?
III. State Medicaid officials are trying to get the Medicaid population into a capitated contract with OneCare and they have filed a request for proposal to that end. But will it be possible to carry that off, given the travails at DVHA?
IV. Now that the Shumlin administration’s credibility is gone, will the Legislature try to step in and start trying to steer the program itself?
V. How will the Green Mountain Care Board manage the twin tasks of short-term regulation and longer term restructuring, now that it no longer has any air cover from the administration?
VI. Will UVM be able to reverse the damaging narrative its opponents have established, especially in the Legislature?
VII. How will the feds affect the progress on the ground in Vermont?
These issues will begin to converge and crest over the next month or so. I’ll be writing columns about all of them. Next up: How will Vermont providers govern a statewide accountable care organization?
