The concept of an Accountable Care Organization is in its infancy is Vermont, and to a
considerable degree in the United States.
The pace is going to pick up, however, as the need to control health care costs continues to be so pressing. By January of 2016 every major health care system in the country is going to be participating in the next phase of the ACO movement.
Vermont will be one of the bellwethers in this campaign. Vermont’s largest ACO, OneCare, has been selected by the federal government to be one of a couple dozen ACOs that will participate in the next phase of the reform effort. The ACO phase of reform is more than simply federal, however. The Vermont Legislature assigned to the Green Mountain Care Board the responsibility for refashioning the state’s system and the use of an ACO structure was part of the state plan from the outset.
An Accountable Care Organization is a group of doctors, hospitals and other health care providers who come together to provide high-quality integrated health care.
As we discussed in part one of this series, in Vermont, OneCare was formed in 2012 by the two
hospitals that provide Vermonters high-level care.
The two hospitals are the University of Vermont Medical Center’s system, which dominates the western part of the state, and Dartmouth-Hitchcock Medical Center, which is located just over the New Hampshire border and 40 percent of their patients come from Vermont. Through 2014, OneCare’s membership also included the state’s 12 smaller community hospitals.
Two smaller ACOs have been operating in Vermont during the first phase of the reform effort. One is called Community Health Accountable Care; it is made up of groups of primary care doctors that get some federal financial support. The groups are called Federally Qualified Health Centers. In 2015, Community Health accepted into membership four small hospitals from eastern Vermont—Northeastern, in St. Johnsbury; Gifford in Randolph; Springfield; and Grace Cottage in Townshend.
The third ACO, called Healthfirst, is a group of about 40 independent physicians, many of
them individual specialists.
The first stage of ACO activity in Vermont is now drawing to a close. Over the past three years all three ACOs participated in so-called “shared savings programs” with Medicare as well as Medicaid and commercial insurers. The basic idea was for doctors and hospitals to begin to get a grip on costs by assembling blocks of patients, calculating the cost of caring for that group in the past, and then trying to constrain the increase in costs for those patients going forward.
If the providers kept the costs under the previous inflation trend, they saved money for Medicare and the other payers, and if they saved enough, they could keep some of that money for themselves. In the argot of the field this is called upside, or one-sided, risk.
It isn’t really risk: heads I win, tails you lose doesn’t meet the dictionary definition. But it was a start; the providers got a feel for the basic idea. Al Gobeille, the chair of the Green Mountain Care Board, calls this period the “training wheels” phase of the ACO movement.
The results of the effort across the three ACOs and the three payer components — Medicare, Medicaid, and commercial insurance — were mixed, and not particularly impressive. They saved some money on Medicare and Commercial insurers, but didn’t get to keep any of the savings. They did save money and got to keep some savings on the payments by Medicaid.
The most important outcome was that most of the players in the acute segment of the state’s delivery system got a taste of the new system.
The most important point, in my view, is that neither OneCare, nor CHAC, nor Healthfirst was actually operating as an ACO, if we assume that an ACO is supposed to be an integrated system. They might have been building infrastructure, and they may have been doing very good work in improving primary care by extending doctors’ ties to their local communities.
But the system pretty much operated as it has in the past, and the savings were more the result of luck than new coordination between units. This observation is not intended as a criticism of any of the ACOs. The preliminary work was necessary. It is just that the level of integration —the seamless management of patients from primary care up the ladder of complexity — is a shift in the medical culture of today where patients move randomly through the system from doctor to doctor without any tight management or coordination.
The movement to date hasn’t really moved the system closer to market discipline. You only do that by taking real risk. With real risk, you make money if you control cost, and quality and you lose money if you don’t. There is still some time left for the training wheels phase.
The Medicare shared-saving agreements can continue through calendar 2016, but after that the focus will be on real risk, where providers can lose money by performing poorly.
The first stage
Vermont is preparing now to enter the era of real risk.
In other words, the training wheels are about to come off. And so far, it isn’t clear at all that Vermont is ready. The immediate question the system faces today is whether the two small ACOs will give up their efforts to operate ACOs on their own; and an equally important corollary — what kind of governance of a single ACO would be acceptable to them.
In other words, how big a role would they have in an ACO dominated by the two big tertiary centers?
Working that issue out has been going on under the guidance of the Green Mountain Care Board for the last nine months or so. The midwife for the process has been Richard Slusky, a veteran hospital administrator, (a long-time CEO of Mt. Ascutney Hospital in Windsor) who joined the Board when it was formed in 2011.
The board has been concerned from the outset of the reform effort to keep all of the major players on board; Al Gobeille, the board chair, likes to describe it as a “coalition of the willing.”
To that end, the board has provided grants to all three ACOs to help them get going and to participate in the shared savings programs. The process has been grindingly slow, however; for the ACO effort is stripping off the veneer of civility that usually reigns in these matters.
One of the issues that has been working just beneath the surface is the bitterness and resentment that the “smaller” elements in the system — small hospitals and many primary care doctors — feel toward the big player, the University of Vermont Medical Center.
To get a sense for this you might read the article by Dr. Katharine Hikel of Hinesburg, a physician who writes about health care, in a 2013 article in Vermont Woman magazine. Her basic claim is that the Burlington-based facility is too big, too expensive, too rich and too overbearing. The components of the UVM system, she wrote, “pay executive-class wages for dozens of vice presidents, revenue managers and marketing specialists whose work has little relation to patient care … A complex tertiary medical center costs more to run than a small community hospital,” she wrote. “The question is whether our tertiary-care hospitals have grown overlarge.”
You hear the same theme from many of the small community hospitals in the state.
The idea gained some public credibility when Seven Days, the alternative newspaper in Burlington, ran a front page story to the effect that the UVM system was swallowing up as much of the statewide system as it could. A variation on the theme is the claim by some of the small hospitals that they are inexpensive and stand in marked contrast to what they call the over-priced UVM system.
This sort of generalized resentment is exacerbated by genuine fear on the part of the primary care community of providers that, in a system of strongly enhanced cost containment, they will get even less money than they do now.
I will argue in the future that the claims that UVM, and by extension Dartmouth-Hitchcock, are too expensive are in fact not valid. The fears about primary care, however, are valid.
Primary care in Vermont, and in the U.S. generally, is badly under-funded and is in a chronic crisis situation. In fact, both the Green Mountain Care Board and OneCare are committed to getting that accomplished as soon as possible.
So, where do the Vermont ACOs go from here?
Let’s start with the smallest. Healthfirst, the grouping of 40 or so independent doctors, has been operating an ACO, in partnership with a national firm, that has been participating in the Medicare shared savings program.
Amy Cooper, the director of Healthfirst, told the Legislature recently that the partnership will drop its joint effort with Medicare. The reason, she said, is that in the three-year phase of the Medicare shared savings program, it was too hard to make any money.
Other providers are disillusioned, too. Dartmouth recently dropped out of a separate ACO that it had been participating in New Hampshire.
A big problem across the board is that Vermont costs are very low compared with other states so it’s very difficult to get under the inflation trend line, and thereby get some “shared savings.”
Cooper says that for Healthfirst the question of whether to operate an ACO in Vermont is still open. It would still be possible to participate in shared savings efforts with Vermont Medicaid or with the private insurance carriers in the state.
“We just can’t tell yet what all this might look like,” she said. Cooper said whether or not Healthfirst operates an ACO, the group will stay together to work for the benefit of its members.
The Community Health ACO, meanwhile, has been resisted moving primary care doctors into OneCare. CHAC’s central concern is to ensure that the primary care segment of the delivery system gets the resources it needs to serve patients well, and to continue to build links into communities that foster wellness for whole populations.
CHAC’s leverage in this situation derives from the federal law that stipulates that a Vermont resident cannot be considered part of an ACO unless he or she is sent their by a primary care doctor. And CHAC has a lot of them.
Joyce Gallimore, who manages the CHAC effort, is non-committal at this point about whether her organization will abandon its stand-alone ACO and lead its members into a single state-wide ACO.
“It’s hard say one way or another,” she said. “Governance of the ACO is one issue. Another is the terms of the agreement with the federal government — how will the money be distributed. What will be the cost of the infrastructure and how will those costs be distributed and how will those costs be distributed to individual providers … there are so many details it’s hard to skinny down,” she concluded.
My guess is that both small ACOs will end up joining a single statewide organization. The reality overarching the whole issue is that you can’t have a credible ACO unless you offer a full range of medical services, and all of the higher-end services available in Vermont are part of OneCare.
Neither Healthfirst nor CHAC encompass a full range of services and therefore can’t take financial risk for big blocks of patients. And if you can’t do that there is no point in operating an ACO in the health care world of the future.
Beyond the simple logic, an important reason to be sanguine about eventual cooperation between the state’s providers is that Todd Moore, the president of OneCare, has been assiduous about cooperating with the smaller ACOs. He has eschewed any use of the huge muscle that OneCare has available in the state now.
Primary care, for example, accounts for only 3 percent to 5 percent of the total health care spending in the state. And even when you subtract the spending by the four small hospitals now in CHAC, OneCare still accounts for more than 90 percent of the hospital spending for Vermonters.
Even if both small ACOs join the single state-wide unit the governance of it remains problematic. Full integration of the delivery system is inherently difficult and would be even if all the players were great pals, which they are not.
The culture of American medicine at least since the end of World War II has inclined strongly toward dominance by specialists over primary care physicians. Anyone who doubts that is invited to consider the money paid to each. Specialists get paid more than primary care docs: actually not more, but rather far, far more.
Health policy theorists have speculated for at least 30 years that medicine needs to reverse that pecking order and to make primary care doctors into “gate keepers,” who can manage all the care given to their patients.
I think it’s a great idea, but anybody who looks inside the system should be forgiven for putting it in the “don’t hold your breath” category. If we consider only Vermont, you can safely put it in the fantasy category.
If we look out, oh, at least five years, or more likely eight to 10, market-type discipline could force an evolution along those lines. But anyone who thinks that in Vermont in the near future a 5-percent tail is going to wag a 95-percent dog is dreaming.
So, the Monday morning meetings will continue, no one can say when we’ll see a resolution of the ACO governance issue. Todd Moore and his team have accepted the invitation to operate a second generation ACO, with the caveat that they cannot begin functioning in the new wave until January of 2017.
The issue of bringing the providers now in the two small ACOs into OneCare is that OneCare will need a full year to get a good start on a truly integrated system, which could be used as the basis for risk contracts with payers.
Even if Healthfirst’s CHAC’s members decide to join OneCare based on acceptable governance, the units won’t be really integrated. That is, they don’t now function now in a coordinated fashion, certainly not to the degree that their efficiency would begin to resemble a seriously competent private-sector organization.
We’ve gone a long way in Vermont, farther, I would argue, than anyone else in North America, but we have only just stepped into the swamp that lies between current reality and the sustainable system that supporters see on the horizon.
The hardest work, in other words, has just begun.
