All pediatrician Brad Friesen wants to do is care for kids.
The business of keeping his primary care practice afloat makes it difficult. Profit margins are thin in the best of times at Pediatric Medicine, where he is a partner, and Friesen said Covid has left the South Burlington practice on tenuous financial footing.
On Aug. 11, Friesen signed onto a letter saying that his office, and 13 other primary care practices in the state, would drop out of OneCare Vermont. The organization, in charge of reforming Vermont health care, is meant to save costs and keep doctors in business — but the program is making it harder for independent physicians to survive, Friesen said.
Starting next year, OneCare will cut regular monthly payments to primary care practices such as Friesen’s. Instead of paying a set fee of $3.25 per patient per month, OneCare would offer a range between $1.75 and $4.25 a month.
“The proposed reduction in payments for independent primary care is presented to us just as our incomes have dropped dramatically and our overhead has soared due to the pandemic,” the letter reads. “The concept of putting independent primary care at more risk is antithetical to any hope for a more efficient and cost-effective health system.”
OneCare CEO Vicki Loner said the change, which will affect about 125 practices, will encourage doctors to be more cost-efficient. If OneCare saves money on health care, doctors, including Friesen, would get a portion of those savings and earn $4.25 per patient per month; if OneCare loses money, the doctors would stay at $1.75.
The option for higher payment would actually “mitigate risk” for doctors during the pandemic, Loner said.
The change in payment is part of OneCare’s effort to expand the all-payer model to include more doctors. In theory, hospitals and now-independent practices can benefit financially when they provide more efficient, cost-effective care and keep patients healthier. The facilities take on “financial risk” and share losses or savings. They receive more money when participating doctors save money; when the system loses money, hospitals pay for a portion of the losses.
Health care officials say that financial risk creates a level of uncertainty that is untenable during the pandemic and economic downturn, and could put Vermont’s health care reform efforts at risk. Several hospitals, including Mt. Ascutney Hospital and Northwestern Medical Center, noted in their 2021 budget filings that they’re not certain if they will continue to participate in OneCare.
The state is at a “decision-making point” in its rollout of the all-payer model, said Sen. Ginny Lyons, D-Chittenden, chair of the Senate Health and Welfare Committee. Vermont needs to figure out how to increase the number of Vermonters who participate and simultaneously get hospitals to a place of financial stability.
According to Lyons, Vermont’s health care future is an open question. “We’re still in the middle of an experiment, remember,” she said.
Whether hospitals and doctors decide to stay in OneCare may determine whether the all-payer system is viable, said Allan Ramsay, a doctor and former member of the regulatory Green Mountain Care Board.
“We’re at a place we’ve never been before,” he said. “That’s a pretty scary place to be.”
It’s make or break time
The pandemic has laid bare the need to change the way health care is funded, Loner said. Hospital revenues took a nosedive when non-urgent appointments and procedures were canceled for two months this spring. When the hospital CEOs submitted their budgets last month, they asked for hefty rate increases. Five Vermont hospitals expect to lose money this fiscal year.
The existing system, in which doctors are paid for each procedure they perform, “has proven to be so brittle,” said Dr. Josh Sharfstein, a vice dean at the Johns Hopkins Bloomberg School of Public Health. A second wave of Covid or a further reduction in care could be a death knell. “Hospitals are being pushed toward bankruptcy,” he said.
The growing financial urgency is pushing states and hospitals to look to replicate Vermont’s approach, Sharfstein said. The three-year-old all-payer model was created to save money across the health care system as a whole. Vermont’s per-capita health care costs are among the highest in the region, according to a recent report by Auditor Doug Hoffer.
When OneCare is fully implemented, the all-payer system will provide steady payments to hospitals and doctors regardless of how many tests they order or surgeries they perform. The all-payer system is meant to incentivize clinicians to keep patients healthy and to offer only the procedures that patients actually need. OneCare funnels more than $1 billion in cash from insurers to hospitals, and manages the IT systems that would provide data and care management to help make the initiative successful.
But first, OneCare needs more Vermonters — and doctors — to participate. Loner, OneCare’s CEO, said she hopes that offering doctors the possibility of earning more money will encourage them to join.
The accountable care organization “needs to be able to self-sustain (fund) its own programs, including its population health investments to primary care and other community providers,” Loner wrote in an email to VTDigger. “To do this, together we must beat our cost and quality targets, and live within our means.”
Hospital CEOs encouraged OneCare to have other providers, such as primary care doctors, take on risk as well, said Dr. Joseph Perras, CEO of Mt. Ascutney Hospital in Windsor and a member of the OneCare board. Under the current system, hospitals are responsible for funding the initiative and covering losses — as well as reaping the rewards for system-wide savings.
Perras and other hospital leaders wanted “to spread some of that risk around,” he said. “Most of us believe that, when you provide skin in the game, there are more likely to be changes to practice, changes to outcomes.”
Loner described the move as an “opportunity” for doctors to make more money. The “additional reward” cash will “help them thrive in this type of environment,” she said.
‘So maybe it’s better to leave’
Paul Reiss, a doctor at Evergreen Family Health in Williston, said he’d be happier with the system if it was determined by the quality of care he provided — rather than the financial success of other, larger health care providers. “We don’t have any real control of whether we get the money back,” he said.
The change in the set fee would cost the practice $100,000, he estimated. Leaving entirely would cost much more, but it would reduce the administrative overhead, Reiss said. Even if the practice did earn the higher end of the range, the OneCare payments wouldn’t arrive until the yearly revenue was settled, months after the costs were incurred. “We can’t afford to have less money up front,” he said.
Reiss says he feels trapped. He had no voice in the decision and has come to rely on the money offered by OneCare. “You do feel helpless, because the only thing you can do is to vote with your feet and leave,” he said.
OneCare will fail, he predicts, because independent providers won’t want to join. “So maybe it’s better to leave rather than stay.”
For Friesen at Pediatric Medicine, the principle of the matter rubbed him the wrong way. “We’re all frustrated … that [OneCare] can control the money we receive and indicate to the public that we need to be incentivized to do a good job,” he said. “We do a good job because that’s the right thing to do.”
Susan Ridzon, executive director of independent practice association HealthFirst, said 18 of 32 primary care practices in the network participate in OneCare and would be affected by the change. Fourteen, including Friesen and Reiss, signed the letter saying they plan to leave. “It’s a huge change at a time it’s really difficult for them,” Ridzon said
Loner said even if primary care practices left the network, she wouldn’t change her approach. The all-payer model “is voluntary,” Loner said. “They can make the choice not to participate in (accountable care organizations) and reform efforts, if they don’t feel like they are able to do so.”
A problem of buy-in
Meanwhile, OneCare is under pressure to expand — and fast.
Hospitals have pledged to commit, but have yet to go all-in on the model. So far, all but one of Vermont’s hospitals as well as Dartmouth-Hitchcock Medical Center have joined the effort, most for a small portion of their patients.
About 223,000 Vermonters, or about 33% of those eligible, participate in — or are “attributed to” — OneCare. The state was supposed to reach 58%, or 305,000, by 2020. An even smaller fraction is covered with the monthly fixed payments.
The initiative hasn’t been universally well received, which has slowed growth. The Vermont teachers union and the state employees union, which provide insurance to a combined 69,000 members and their families, decided not to join OneCare. Mike Smith, secretary of the state Agency of Human Services, criticized the effort for its lack of transparency. Auditor Doug Hoffer published a report arguing that the state won’t know whether the initiative is successful because the regulatory Green Mountain Care Board isn’t tracking whether the savings outweigh the operating costs of OneCare. Health care costs have continued to climb above the national average, over the 3.5% threshold set by the Care Board.
The enthusiasm of hospital CEOs has waned during the financial strain of Covid. Even as OneCare tries to incentivize higher levels of participation, hospitals are hesitant to take on more financial risk.
“Our reflex is to circle the wagons and be conservative in how we budget, what we contract,” said Perras, of Mt. Ascutney Hospital, who’s also on the board of OneCare Vermont. Perras said his hospital board will vote next month on whether to stay in the all-payer system.
Shawn Tester, CEO of Northeastern Vermont Regional Hospital, said OneCare has provided some “really great benefits” of fixed payments and helpful data. But “we have to balance that against the amount of risk,” he said. “Any small hospital has to be extremely careful.”
“The potential financial cost could sink a small hospital,” he wrote in an email to VTDigger. “NVRH would need to take on an additional $2.5 million of risk every year to participate in the Medicare program. That far exceeds the operating margin we earn annually. One or two bad years would put our financial health … at serious risk.”
Northwestern Medical Center has suffered financial losses, which executives blamed, in part, on OneCare. Hospitals must pay dues to OneCare, which add up, said spokesperson Jonathan Billings. Other than staffing, participating in OneCare is the single biggest expense for the hospital and accounts for a third of the requested rate increase, he said.
The hospital would stay in the program only if the Green Mountain Care Board granted the St. Albans hospital a request for an unprecedented 20% budget increase, Billings said.
OneCare has cut hospital dues by about 25% during the pandemic, and will consider extending those cuts, Loner said. It’s asking the Center for Medicare and Medicaid Services for permission to decrease the financial risks to hospitals.
The federal agency has already agreed that hospitals will not be responsible for quality metrics for this year. It has also created a program to encourage rural hospitals to join accountable care organizations such as OneCare.
“I would say that every hospital system that I spoke to is committed to health care reform and it’s just a matter of degree and if they can stay in the game, or not,” Loner said.
‘The best we have’
Meanwhile, state officials are resolute about the health care reform path Vermont has set.
The all-payer model “gave us flexibility during the pandemic to make sure that cash flow was going to our health care system,” said Smith, of the Agency of Human Services. “We did also have other supplemental programs, but it certainly was a player in helping keep the health care system from collapsing during Covid.”
Green Mountain Care Board Chair Kevin Mullin said he remained optimistic because there was no plan B. “I’m not saying it will work. It’s the best that we have at this time,” Mullin said. Halting the effort now is “like giving up in the second inning of a baseball game. You just don’t do that.”
Mullin said he wished the Scott administration would push the model more aggressively. Others, including Richard Slusky, former director of payment reform who helped create the model, blamed state officials, including Mullin and the Green Mountain Care Board.
“If they’re serious about making it successful, they need to be more publicly engaged in making it happen,” Slusky said. Without a change, “costs are going to increase, it’s not going to be enough to keep all the hospitals alive. Hospitals are going to go bankrupt or [have to] change their system under duress.”
Experts agreed that OneCare must plunge on; despite the kinks in the system, returning to the status quo would be worse than moving forward.
Success will require “that all patients — and I really mean all — are under the model,” said Elliott Fisher, professor of health policy at the Dartmouth Institute. Until that happens, Vermont won’t “achieve the hoped-for gains.”
But that will take time. “Patience is indeed the right answer,” Fisher said.