This commentary is by Paul Manganiello, M.D., a resident of Norwich who is emeritus professor of obstetrics and gynecology at Geisel School of Medicine at Dartmouth and co-medical director of the Good Neighbor Clinic in White River Junction.
This November, VTDigger had a three-part series on the need for meaningful health care reform in Vermont. The authors (Julie Wasserman, Patrick Flood and Mark Hage) discussed the current problem, what reforms are needed, and possible alternatives.
As they stated, health care charges to Vermonters are “exploding” and are unsustainable.
As Wasserman pointed out, one reason for these exploding hospital charges is due to increasing hospital costs affecting, primarily, the commercial insurance market and not necessarily affecting Medicare rates. She claims that one of the drivers of these increased charges is due to “avoidable hospital care” (emergency room utilization, and inpatient care), care that is unplanned and can be reduced by better health care coordination and effective community-based services.
She related that consumers have a hard time understanding what justifies such price hikes. OneCare Vermont, the Vermont Accountable Care Organization that was supposed to “spearhead” health care reform, has not been able to reduce charges to patients, or improve overall health care quality. In other words, Vermonters are not getting value for the health care dollars they spend: better outcomes for less cost.
Patrick Flood, in the subsequent commentary, claimed that the state’s efforts to reform Vermont’s health care is really a “thin-veiled” effort to maintain the UVM Health Network’s dominance of the current health care “system.” He doubts that the health of Vermonters will improve until we truly focus our efforts on population health, focusing on primary care, preventive health services, and better coordination of where and how health care services are delivered.
Mark Hage concluded the trilogy with some proposed reforms. He offered several good suggestions, but I would like to focus on global budgets and, within those, bundle payments.
Global budgets are payment models in which providers, typically hospitals, are paid prospectively — a fixed amount of money for all of the services a hospital may provide during a given period of time. A bundle payment is a payment structure in which different health care providers (orthopedic surgeons, say) who are treating you for the same or related conditions (knee replacement) are paid an overall sum for taking care of your condition rather than being paid for each individual treatment, test, or procedure.
OneCare was created in an attempt to shift the state’s health care spending from a fee-for-service model to one in which providers get a flat fee per patient. It has been in existence for six years with not much to show for it.
During one of their joint meetings concerning the OneCare budget, and prior to the Green Mountain Care Board’s recent approval for an extension of the state’s 2016 agreement with the federal government’s Center for Medicare and Medicaid Innovation, OneCare was questioned about lack of attaining meaningful metrics.
OneCare executives pushed back on the criticism, arguing “‘that changing the entire health care system takes a long time. How do you manage the one-year payer contract cycles and performance expectations with long-term outcomes that, our clinicians remind us all the time, it’s going to take years, decades, generations to address?’ OneCare Chief Operating Officer Sara Barry said.”
Vermonters shouldn’t be expected to wait generations to address affordable access to quality health care. This ACO experiment currently is not working. The Green Mountain Care Board needs to hold OneCare accountable and pull the plug in two years, if there is no significant improvement in health outcomes.
Until we institute global budgets and bundled payments, we will never be able to equitably finance the health care needs of Vermonters. But before we can institute global budgets and bundled payments, we need to be able to measure what it costs to deliver a “service.”
As management guru Peter Druker was quoted, “If you can’t measure it, you can’t improve it.”
Here is a 25-minute video by Professor Robert S. Kaplan from the Harvard Business School, using process mapping to measure costs in Health Care: Time Driven Activity Based Costing.
I retired in 2012, but before then, I was the director of reproductive endocrinology and infertility at the Dartmouth-Hitchcock Medical Center. Each year, we would meet with the hospital financial division to decide on the charges we would post for the subsequent year for couples who chose to undergo a cycle of in-vitro fertilization and embryo transfer. Those were the charges that individuals without insurance would pay, while we would negotiate a different charge to different insurers.
How these charges were decided were anything but transparent or consistent. The discussion would go something like: “Well, how much should we increase our rates this year?” They had no idea about how much the actual procedure cost!
Charges that patients see bear very little resemblance to the actual cost of delivering a specific service. For too long, we have allowed health care institutions to conflate charges with costs. This has resulted in the current health care financial environment Vermonters are living in.
The government cannot by itself make the reforms that are needed, but neither should it enable medical centers to continue down the same path that we are on. Unless these medical institutions are forced to reform how they operate, there is no incentive to improve. They have to be held accountable and the negotiations between private insurers, Medicare and Medicaid, all payers, needs to be transparent.
A March 2022 report from the Commonwealth Fund found that utilizing a flexible global budget to pay hospitals based on their variable costs for incremental increases or decreases in volumes might help to remove fee-for-service incentives, which induce hospitals to provide unnecessary and low-value care. Global budgets may give states a tool to effectively constrain hospital expenditure growth for all payers. This payment scheme is also less complex than models that set explicit prices or price caps for every service.
Make no mistake about it: Unless we are able to address the social and behavioral determinants of health (education, jobs, healthy food options, safe housing, integrated communities to address social isolation and protect our air, water, and soil quality, etc.), we will not experience optimal health.
Access to high-quality health care is only the “tip of the spear.” We’ve got to address the root causes of poverty if we really care about population health, but we also need to address how we actually finance health care when needed.
We will need to walk and chew gum at the same time.