(This story was updated and expanded July 11 at 5:55 p.m.)
[S]tate regulators have approved a permit for an independent surgical center in a controversial case that has dragged on for two years.
The Green Mountain Care Board issued the permit, called a certificate of need, in a 4-1 decision issued late Monday night.
Con Hogan, the lone dissenting vote, said the decision would erode the board’s cooperative relationship with hospitals. Board member Robin Lunge said she agreed to endorse the project “with reservations.”
The decision allows a group of independent doctors — who remained anonymous during the legal proceedings for fear of retaliation from hospitals that opposed the project — to break into a general surgery market that has been exclusively controlled by hospitals.
The board issued 29 conditions for the running of the facility, called the Green Mountain Surgery Center. Investors have already bought land on Hercules Drive in Colchester near Costco.
One condition requires the center to participate in a payment model through an accountable care organization, such as OneCare Vermont, which is owned by the University of Vermont Medical Center and Dartmouth-Hitchcock Medical Center.
Another requires the surgical center’s administrators to make quarterly reports to the Green Mountain Care Board in the first few years of the project. The center is also required to disclose the ownership interest of any doctors performing surgeries there.
Other conditions require the investors to make good on promises they made during the regulatory process, such as creating a website that transparently lists prices for consumers, negotiating prices with commercial insurance companies that are below what hospitals are paid, and accepting patients without regard for their ability to pay.
The board is also requiring the surgical center to contract with emergency medical services for cases in which patients need to be taken to the local hospital and to give patients their surgeon’s 24/7 contact information.
Throughout the case, two of the closest hospitals to Colchester — the UVM Medical Center in Burlington and Northwestern Medical Center in St. Albans — have said they could lose revenue from outpatient surgeries if the independent center were built. The board dismissed that argument.
“This Board regulates the hospitals’ budgets, and we do not foresee calamitous and irreversible financial implications resulting from decreased surgical volumes,” the board wrote. Members argued that hospital revenues would not suffer given that both exceeded the revenue caps the board set in fiscal years 2015 and 2016.
While the Green Mountain Surgery Center met the burden of proof for the permit, the board said, the decision “does not, however, and should not, be viewed as an open door for any similar health care entity that seeks to operate in this State.”
“With the conditions we impose today, we seek to hold the applicant to its pledge that it will lower health care costs, increase access to care, and maintain or improve the quality of health care in Vermont,” the board wrote.
Reaction from stakeholders
“I feel great about this decision,” said Amy Cooper, the lead investor on the project and executive director of HealthFirst, a group representing independent doctors. “I feel great for the patients. I feel great for Vermonters. I feel great for the businesses that supported us. I feel really encouraged that the board listened to all of the public input and made a decision that is really in the best interest of the community at large.”
Cooper said the surgical center allows the independent doctors to have a role in Vermont’s health care reform efforts, which are centered on having one giant organization, such as OneCare, controlling payment to all hospitals and doctors offices in the state.
“I also think that this surgery center is on the path towards us together tackling the health care cost problem, and I think the board was able to recognize that the surgery center is part of the solution,” she said.
Cooper had said throughout the case that the Green Mountain Surgery Center would lower costs for patients because Medicare — and therefore commercial insurance companies — would pay the surgeons about half what they would be paid if the procedures were done at the UVM Medical Center.
Cooper said she was most surprised by the timing of the decision. The board’s original deadline for a decision was July 10, but she said the board had declared it would extend that and make the decision in early August.
Cooper said she is not yet concerned about meeting the conditions in the certificate of need. “Upon my first review, I think that we’ll be able to comply with the conditions,” Cooper said. “A lot of it is things that we had said we would do throughout the process, including contracting and working with the ACOs.”
She called the requirements around the consumer website and price transparency “one of the parts of the projects that I’m most excited about.”
Jeff Tieman, the CEO of the Vermont Association of Hospitals and Health Systems, which intervened in the case to oppose the surgical center, said the state’s hospitals should keep moving forward in the wake of the decision.
“This is an issue that we’ve obviously cared very deeply about and been very invested in on behalf of the people of Vermont and our health care landscape, but it’s been resolved, and we’re pleased that there are conditions attached to the CON,” Tieman said.
“At this point … I think it’s really important that we move forward and that hospitals continue to do the work they’re doing to serve their communities, advance health reform, and make Vermont a healthier place to live,” Tieman said.
He said it is “too early to say” whether the association would appeal the decision. “I wouldn’t want to foreclose any options, but right now we’re still carefully looking at those specific (29 conditions), and we’ll have board conversations going forward on this,” he said.
Jonathan Billings, the spokesperson for Northwestern Medical Center, which also intervened in opposition to the project, said the hospital is not likely to appeal the decision to the Vermont Supreme Court either.
“We haven’t made an official decision on that, but I don’t anticipate we’ll be appealing,” Billings said. “We’ll spend some more time with the decision and the 29 conditions.” He added that the hospital was “surprised by the ruling and disappointed by it.”
Billings said the hospital appreciates that the board placed conditions on the surgery center, but that there is still no need for a surgery center because the hospitals have operating room space. He did not have an estimate of how much money the hospital would stand to lose from the surgery center.
“We will have a better sense for that once the names of the physicians who are involved in this are public,” Billings said. “At this point, we don’t know who might be from our area involved in this who would be pulling patients out of the area.”
Cooper said the names of the investors, many of whom are local doctors, would be made public closer to the center’s opening, which could be within a year.
Dissenting opinions at the board
Lunge wrote in a separate, but concurring, opinion that she had “reservations” about approving the certificate of need, but that the 29 conditions allowed her to join the majority.
Lunge wrote that she would have added another condition to require the applicant to redesign the surgery center. The one the board approved is “overbuilt for the projections” of how many surgeries the doctors expect to perform.
Additionally, Lunge said the surgery center investors had only proven that Medicare would pay them about half as much for services. “Medicaid reimbursement,” she wrote “is a different matter entirely” because the state’s Department of Vermont Health Access decides how much to pay health care providers.
“Moreover, the applicant failed to consider the issues raised by Vermont’s unique commercial insurance market,” Lunge wrote. “Vermont’s largest payer, Blue Cross Blue Shield of Vermont, does not use Medicare as a reference price, but instead reimburses on two, primary fee schedules.”
One of those is for the UVM Medical Center, and the other is for all other providers — including independent doctors and small community hospitals.
“I must emphasize that should the (Legislature), or the board, equalize commercial fee-for-service reimbursement between the academic medical center and independent physicians for outpatient services in the future through a ‘pay parity’ policy … a primary rationale for approving the (surgery center) would be eliminated,” she wrote.
Hogan wrote a six-page dissenting opinion saying the surgical center “would contribute to the fragmentation of Vermont’s health care system” and “increase costs systemwide.”
“The board made a crucial decision today without considering the larger environment — for instance, the effect of any potential federal changes to Medicaid funding on hospitals,” he wrote in his conclusion. “At the very least,” he said the decision “should wait until there is less uncertainty at the federal level.”
He concluded by warning that the decision would hurt the board’s relations with the hospitals it regulates, and that the board would not be willing to revoke the certificate of need if the surgery center violates any of the 29 conditions.
“With the board’s decision today, we will lose the collaborative relationships we have had with most hospitals around the state for six years,” he wrote. “They simply will not trust us.”
“As a result, the hospital budget process will become increasingly hostile, especially as hospitals find themselves under mounting financial pressure,” he added. “Ultimately, it will not be a battle the board can win. We will also lose the relationship we have developed with the federal government, to which we assured progress towards developing an integrated health care system.”
“The board will eventually lose control of the surgery center as well,” Hogan wrote. “The conditions imposed in the CON are a good start, but I believe those conditions will prove to be unenforceable.”
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