(Editor’s note: Hamilton E. Davis is a health care columnist for VTDigger. He 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 recent two-paragraph press release announcing the agreement between a group of Vermont primary care doctors and the bulk of their hospital and doctor colleagues over how to structure an integrated delivery system is a major milestone on the road to health care reform in the state.
The deal capped nearly two years of grinding and often contentious negotiations between a group comprised of 250 to 300 primary care docs who operate in Federally Qualified Health Centers (FQHCs), and who are gathered into an organization called Community Health Accountable Care (CHAC); and OneCare Vermont, a group anchored by the University of Vermont Health Network and Dartmouth-Hitchcock Medical Center; it includes all but four of the states 13 community hospitals.
There was a third player — HealthFirst, a group of independent physicians, including both primary care and stand-alone specialists. HealthFirst is much smaller than the other two, and in any event is more interested in independence than integration so I will deal with them in a future column.
OneCare, Community Health Accountable Care and HealthFirst now operate as Accountable Care Organizations (ACO) under federal law. An ACO is intended to be roughly similar to a private sector company that would deliver health care to a sizeable block of patients at an annual price per person. That kind of financing, called capitation, would replace fee-for-service, the type of reimbursement that obtains in both Vermont and the United States now. In the health policy biz, that shift is considered essential to getting health care costs under control.
The reason for that conclusion is that for the first time in American medical history, an integrated system paid for on a capitation basis would take responsibility jointly for both the overall cost and the quality of the system as a whole. The teeth in that formulation is that once the system negotiates a per capita rate for a cohort of patients it takes “risk” for its own performance.
If the ACO gets the care delivered and the quality held high at less than the negotiated cost, it gets to keep some of the savings. If, on the other hand, it exceeds the agreed-upon price, it has to absorb part of the overage. This dynamic is called taking “risk” and it is risk contracts that lie at the center of the Vermont reform project.
The importance of the Community Health Accountable Care posture in this new environment lies in the Obamacare provision that the only way a patient can be included in an ACO is by being referred there by a primary care doctor. There are about 700 primary care doctors in the state; OneCare has 300 or so and CHAC has nearly that many. So, a merger nearly doubles the potential size of the intake portion of an integrated system.
The merged organization would be called Vermont Care Organization (VCO).
That development, in turn, advances the cause of the second major hurdle facing reform in the state: the effort by the Green Mountain Care Board to persuade the federal government to send an extra slug of Medicare money into Vermont so as to encourage the construction of the statewide ACO.
That decision by the feds is still pending, but given that the feds hope to get 80 percent to 90 percent of the state into a single ACO, the new agreement should count as a point in the Green Mountain Care Board’s favor.
The Board plays a critical role in the integration effort because the state’s health care reform law vests the responsibility for both encouraging the formation of a state-wide ACO, and regulating its operations, in the Board.
How Would the New ACO Work?
In the first phase, the new ACO—named the Vermont Care Organization (VCO)–would function as an umbrella that would oversee two operating ACOs—OneCare and CHAC. OneCare would be positioned to enter into risk contracts as soon as possible; technically that would be as of Jan. 1, 2017, but sometime in 2018 is more likely.
CHAC would function as a home for FQHCs or small hospitals that aren’t ready to take risk yet. Those units would continue to be reimbursed through the normal fee-for-service mechanism.
Over time, the health care centers in the low risk Community Health Accountable Care group would begin to migrate to the risk side as they gain familiarity with and confidence in the system. Eventually, the community group would become members of the risk bearing ACO, and both individiual ACOs—OneCare and CHAC, would be subsumed into one unit, the Vermont Care Organization. No one can tell at this point how long this evolution/migration would take.
Three to five years wouldn’t be a stupid estimate, but it could be an over optimistic one. A major factor in the migration rate would be federal approval of the Green Mountain Care Board’s all-payer model, the centerpiece of which is a big bump in Medicare payments in the state.
The major beneficiaries of such a bump would be doctors and hospitals in the risk-taking ACO—that is to say, OneCare—compared to the percent bump that would flow to the non-risk community doctors. A second factor that could drive primary care docs into the risk arena would be an offer from OneCare to pay them more than they could get from the fee-for-service system.
In any event, at the outset, both OneCare and the community health centers would continue to operate under the direction of their current leaders and their own boards. The new Vermont Care Organization would function for a time as a shell. But it will establish a new board and that board will at some point elect a president.
OneCare and the Community Health Accountable Care group would continue to maintain their own boards, which is required under Vermont law, but their leaders would report to the president of the VCO.
In terms of conventional business organization, the CHAC and OneCare leaders would function as chief operating officers reporting to the CEO of the new body.
How Did They Get Here?
This whole structure looks complex, and it is, but there is no intrinsic reason why it shouldn’t work. But it was a very close run thing: the whole negotiating process very nearly blew apart in late May and early June. And it finally succeeded only on the strength of a major realignment of the political forces involved.
A quick recap of the process:
The discussions on how to build an integrated system in Vermont were coordinated by Richard Slusky, a senior staff member of the Green Mountain Care Board. They began a few years ago, but the process accelerated last summer with the formation of a committee made up initially of the three ACOs then operating in the state, OneCare, CHAC and HealthFirst.
All three signed a Memorandum of Understanding dated Sept. 15, 2105, pledging to cooperate to build a single system to function as the platform for health care reform in the state. The so-called MOU steering committee met through the fall to work on the project.
The atmosphere in these sessions was often contentious, mainly around the question of UVM Health Network’s dominant position in the delivery system; but by January 2016 the parties had agreed on a structure for a single ACO, with a set of operating principles and a governance structure. They called this the “Framework,” and it went up on the Green Mountain Care Board web site in January.
I have written at some length about this document. It seemed to me that it was heavily skewed in favor of CHAC and the small hospitals in the state; but OneCare had signed off on it, and the question then became whether CHAC and HealthFirst would actually agree to enter into the new entity.
The discussions to that point had been heavily influenced by Bi-State Primary Care, a nonprofit that advocates for primary care doctors and community-based services in Vermont and New Hampshire. The lead player in that group was Sharon Winn, a Bi-State Primary Care staff member based in Montpelier.
In the framework, for example, the language on payment methodologies was actually written by Winn. Winn was not, however, a member of the official Community Health Accountable Care delegation; that role was played by Kevin Kelley, who ran a health center in Lamoille County, and Grant Witmer, who ran the Rutland health center. But Winn was obviously leading the CHAC effort.
In late May, Winn dropped a bombshell on the group. In a memo to OneCare dated May 23, Winn made a series of new demands that obviously could not be met. The main one was that OneCare commit to providing primary care doctors with a 10 percent pay increase every year. A second was OneCare pay $500,000 a year to an organization that aids primary care doctors. A third was that if the ACO performed well enough that it achieved some savings, all of it would go to primary care doctors.
This communication, immediately dubbed “the ransom letter” inside the group, threw the whole project into confusion. Slusky denounced it, (see my earlier column). The players were still trying to absorb the implications of the Winn memo, when the word began to spread that Community Health Accountable Care had submitted a competing bid for the job of providing care for the Medicaid population in the state.
Not only was that a clear abrogation of Community Health Accountable Care’s pledge to work together with the other ACOs, the CHAC bid was submitted in partnership with United Health Care, one of the biggest and most sharp-elbowed for-profit health insurers in the country.
The last was a huge political mistake that led to a sea change in the whole political process. A major player in that was John Brumsted, the president of the UVM Health Network, who made it clear that his organization would have nothing to do with the kind of thing that was going on in the committee. It was also clear that Bi-State had isolated itself from its allies within the negotiating group.
That fact became clear on June 24 when Kevin Kelley, chair of the CHAC board, wrote a letter to the committee members, reaffirming CHAC’s commitment to the idea of a single ACO, and withdrawing the CHAC bid on the Medicaid contract. “It is imperative at this point to join forces and commit our collective resources to expedient formation of the VCO so we can begin our work to improve the health care system for all Vermonters,” Kelley wrote.
Further evidence that the community health centers were taking back control of their own organization came in the agreement that was reached earlier this month. The formal announcement came in the form of the two-paragraph press release by Tom Huebner, the president of Rutland Regional Medical Center and a key member of all the players — the MOU steering Committee, CHAC and OneCare.
The announcement did not go into any significant detail, but subsequent discussions with those involved clearly illuminated the extent to which CHAC had shifted its course toward cooperation with OneCare and away from the adversarial posture of Bi-State.
The key move: In the agreement negotiated over the last year, Bi-State would have been empowered to select the Community Health Accountable Care representatives to the new Vermont Care Organization board. Under the final agreement, Bi-State can supervise an election by the FQHC or hospital members of CHAC, but cannot participate in the election and, importantly can not serve on the board itself.
Moreover, the agreement includes the principle that all members of the new board must be actual providers of services patients or community member, not advocates or trade associations or those representing providers. There can be no participation, for example, by the Vermont State Medical Society, or the Vermont hospital trade group.
This part of the agreement subsumes the understanding that members of the Vermont Care Organization board have to be committed to the purposes of the organization, and not function as a consistent opponent. The target of this provision is neither the medical society nor the hospital association. It is Bi-State. There is no way that Sharon Winn gets to serve on the new board.
The final agreement in other words significantly damped down the hostility between OneCare, UVM, and the primary care docs in the FQHCs. After a year in which OneCare and UVM gave the Community Health Accountable Care group virtually everything it asked for, the community health center members of realized that OneCare and UVM were prepared to walk away, and the leadership of the centers did not want to see that happen.
Hence the Kevin Kelley concession letter of late June, the withdrawal of the United Health Care caper, and the CHAC acquiescence in the significant shifts in the way the new board would be constructed.
The whole process and its final outcome wasn’t necessarily pretty, but it left a workable structure in place. Which is a major step forward for the cost containment process of reform.
