Not enough time for a global budget experiment at Rutland Regional, state says

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Not enough time for a global budget experiment at Rutland Regional, state says

Tue, 06/17/2014 - 11:38am -- tim

by Morgan True Rutland Regional Medical Center and state regulators have dropped plans for a payment reform pilot program that would have capped the hospital’s budget, but also guaranteed its revenue in the coming year, officials said. Regulators and other state officials said the pilot wouldn’t go forward because there wasn’t sufficient time to obtain federal waivers, negotiate contracts and transition Rutland Regional to a payment model known as a global budget. Global budgets are set payments determined by regulators to care for the population a hospital serves. It is an alternative to the hospital’s billing for each individual service it provides.

State regulators already set hospital revenue, but are limited in their ability to penalize hospitals that overshoot their budget. Likewise, hospitals that come in under budget aren’t able to keep that money.

A global budget would make both outcomes possible, and represent an opportunity for hospitals to lock in revenue, especially one like Rutland Regional with a stable, well-defined patient population.

Paying hospitals to steward a population’s health, rather than allowing them to be paid for the volume of care they provide, is widely seen as critical to controlling the growth in health care costs.

Sen. Kevin Mullin, R-Rutland

At a recent meeting of the legislative Health Care Oversight Committee, Sen. Kevin Mullin, R-Rutland, alleged the Department of Vermont Health Access “dragged its feet” in setting up the Medicaid component of Rutland’s global budget.

“There was a number of us in the Legislature who were pushing the Medicaid people to sit down and work on this a long time ago … and they dragged their feet because they were so busy with the exchange,” Mullin said.

But DVHA Commissioner Mark Larson said his department would’ve needed approval from the federal Centers for Medicare and Medicaid Services to allow the state’s Medicaid program to participate.

In a system with multiple payers, such as commercial insurers, private health plans, Medicaid and Medicare, each payer would need to sign a contract with Rutland Regional for the coming hospital budget year, which begins Oct. 1.

Having Medicare participate was out of the question, according to Green Mountain Care Board Chair Al Gobeille. The federally operated health care program for the elderly and disabled moves more slowly in approving payment reforms than state operated Medicaid programs.

Al Gobeille. VTDigger file photo

Gobeille said several of the largest commercial insurers in the state were willing to participate, but after several meetings with DVHA – which operates the state Medicaid program – “it became painfully obvious to us that there was no way we could meet the October 1st deadline.”

Neither of Vermont’s Medicaid waivers would have allowed it to enter a Medicaid global budget contract with Rutland Regional without separate approval from CMS, Larson said.

In addition, Larson said his department would have needed to negotiate with the hospital on what health services and population would be covered by the budget, model the financial impacts, provide an opportunity for public and stakeholder input and negotiate the value of the contract itself.

The minimum time frame for finalizing global budget contracts would be 17 weeks, more time than was available once the parties all began to coordinate, Gobeille said. Mullin maintained that time frame could have been met had DVHA come to the table earlier.

VTDigger first reported on the planned global budget pilot in April, but it’s unclear when regulators, state officials and hospital officials first discussed the pilot.

Gobeille questioned the wisdom of going forward with a partial global budget that would not include Medicare or Medicaid, a significant portion of any hospital’s payer mix.

Moving forward with only partial payer participation would leave too much of Rutland Regional’s compensation on a “fee-for-service, volume-driven diet,” Gobeille told lawmakers.

Gobeille also expressed skepticism about whether Vermont should pursue the type of global budgets Maryland has built for its hospitals.

“What we would like to do is not limit global budgeting to hospital care,” Gobeille said.

If the state and other payers lock in budgets for just hospitals, it won’t put downward pressure on system-wide health care spending, which hovers around $5.2 billion annually, he said. In-state payments to hospitals totaled $1.9 billion in 2012, according to figures from the Green Mountain Care Board.


Gobeille told lawmakers at last week’s oversight meeting that Vermont needs to focus on reducing costs and improving outcomes before it pushes forward with a public program to finance those costs.

“We need to put the payment and delivery reform as the priority and the financing portion of single-payer shouldn’t be done until we know what we’re financing,” he said.

It’s unclear how that would occur given the governor’s timeline for transitioning to single-payer, which anticipates lawmakers approving a financing plan and benefits package for the program during the next biennium.

ACOs in the state signed contracts with the state’s two largest insurance carriers and two signed agreements with the state’s Medicaid program earlier this year.

The three-year shared-savings agreements will replicate an ongoing model first offered by CMS through Medicare in 2013. All of the Vermont ACOs, which combined include nearly the state’s entire provider community, are participating in the Medicare shared-savings program, which began last year.

The current Medicare shared-savings agreements end in 2016 and the commercial and Medicaid agreements end in 2017.

Gobeille referred to the end of each of the current contractual agreements as a “decision point” for payers and providers to assess whether the program is reducing costs and improving outcomes.

The shared-savings agreements between payers and Vermont’s three Accountable Care Organizations (ACOs) could eventually become a form of global budget, Gobeille said, because they essentially offer a capitated payment tied to health outcomes for patients, that will include a broader swath of providers, he said.

In a shared-savings contract, ACO providers agree to meet quality standards for the care of a patient population at a specified cost. If the providers can meet the quality standards for less, they split the savings with the payer.

In the first round of three-year contracts the providers can only realize savings. But if the providers and payers agree to participate in a second round of shared-savings contracts, they will include downside risk, where the ACOs would share the cost of overspending.

Working closely with state regulators providers participating in ACOs are making upfront investments in changing their delivery models to increase their odds of success – or keeping the population covered by the agreement healthy.

Those include greater use of electronic medical records to track patient care across providers and the formation of clinical teams to manage patient care.

Between the Medicare, Medicaid and commercial shared-savings programs, Vermont’s ACOs have 150,191 attributed lives, meaning that an ACO has agreed to cover the cost of those people’s care for a predetermined amount. If the costs exceed that amount, providers won’t be on the hook during this first three-year contract.

Some hospitals, including Dartmouth Hitchcock Medical Center in Lebanon, N.H., have had success with a CMS pilot of the Medicare shared-savings program that began in 2012. Hospital officials said they saved $1 million in the first year for treating their Medicare patients more efficiently.

But not all participating hospital systems were able to achieve the same result. A July 2013 news release from CMS stated that less than half, 13 out of 32, hospital systems participating in the so-called “pioneer group” Medicare ACO achieved savings.

Though the earliest the state can obtain a federal waiver to launch a publicly funded universal health care program is 2017, much of the framework is expected to be in statute before the state will have a firm grasp on whether its ACO shared-savings programs are achieving the intended result.