This commentary is by Richard Slusky of South Burlington, who was CEO at Mt. Ascutney Hospital and Health Center in Windsor from 1982 to 2010. After retirement, he was director of payment reform for the Green Mountain Care Board for six years. He now owns Slusky Consulting LLC.
Two recent articles in local news media provide evidence that Vermont’s health care reform initiatives are still not gaining traction with health care providers and payers.
The first was a Burlington Free Press article on the variation in hospital prices. The article noted that prices for the same service vary significantly from hospital to hospital. In one example, the posted price of a brain MRI was $6,019 at one hospital and $2,377 at another.
What may not be understood by the public is that, for the most part, these prices are irrelevant, since Medicare and Medicaid pay the hospitals a fixed price per procedure, regardless of the posted price, and commercial payers pay based upon prenegotiated discounts.
However, these prices continue to be embedded in a fee-for-service payment system that remains the primary mechanism for paying health care providers despite the fact that one of the primary goals of the all-payer health care reform model was to transition away from fee-for-service to a system of fixed payments based on value rather than volume.
The second article was a VTDigger report titled “Hospital officials ask for relief from regulation, citing strain of the pandemic.” This article suggests that the hospitals want the Green Mountain Care Board to “eliminate the hospital budget process entirely” due to the “increased cost and responsibilities hospitals have shouldered during the pandemic.”
Now, there is no doubt that the Covid-19 pandemic has placed tremendous burden on the hospitals, their staffs, and all of the essential workers who have worked tirelessly, and at great personal risk, to provide Vermonters the care we need. We owe a tremendous debt of gratitude to all of them.
What concerns me is that these two articles are indicative of the lack of progress that Vermont is making to implement the all-payer model accountable care organization agreement that the state entered into with the Centers for Medicare and Medicaid Services in October 2016. Specific goals of the agreement are to limit annual per-capita growth in health care costs to a rate of no more than 3.5% over five years, have 70% of all Vermonters and 90% of Medicare beneficiaries attributed to the reform initiatives, and meet statewide quality performance targets.
According to the most recent reports, and a compliance warning from Centers for Medicare and Medicaid Services, the targets have not been met, and some health care experts warn that success “will not be achieved until all Vermonters” are attributed to the model.
One of the specific initiatives necessary to achieve these goals is to transition from fee-for-service, volume-based payments to fixed prospective payments (such as per-member-per-month or global hospital budgets), which encourage health care providers to focus more on population health and cost management rather than revenue enhancement.
For prospective payments to influence provider behavior in this way, it is estimated that at least 60% to 70% of the total payments must be fixed, rather than fee-for-service. However, when Vermont hospitals submitted their fiscal year 2021 budgets to the Green Mountain Care Board, on average they estimated that only 14.5% of their budgeted net patient revenues would come in the form of fixed prospective payments.
In 2020, this lack of progress in transitioning to fixed payments left hospitals and other providers vulnerable to the financial impact of the Covid-related cancellation or postponement of many services and procedures, and the related loss of fee-for-service payments. Were it not for over $400 million in federal and state Covid relief funds paid to the hospitals in 2020, their financial situation would have been even more dire.
If the hospitals and other health care providers had enrolled more Vermonters into the accountable care organization model and been reimbursed during the past year on a predominantly fixed-payment basis rather than fee-for-service payments, a significant portion of the hospitals’ budgets would have been prospectively paid, and the hospitals’ financial losses, might have been, for the most part, avoided.
Although many health care advocates are urging that Vermont abandon the all-payer accountable care organization model and seek alternative health care reform initiatives, in my opinion the original goals of the all-payer model ACO agreement, if properly implemented, remain valid.
As I suggested in an earlier commentary, the Green Mountain Care Board and the Agency of Human Services, under the governor’s directive, should immediately convene a broad stakeholder group, similar to what was done in 2015, to address the concerns that have been raised, and to develop a detailed implementation plan to ensure the success of Vermont’s health care reforms through the accountable care model.
We have come too far over too many years to simply abandon our health care reform initiative, or allow it to die for lack of leadership and attention. Bearing in mind that there is no “Plan B”; it is the responsibility of those who entered into and are responsible for the success of the accountable care model (the governor, the secretary of the Agency of Human Services, the Green Mountain Care Board, and the board of OneCare) to establish and oversee an inclusive process to address the problems, consider alternatives, and seek solutions to ensure that all Vermonters have access to affordable and quality health care services. We need that leadership to make this work.
