Hospital payment reform focus shifts to primary care

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Hospital payment reform focus shifts to primary care

Tue, 09/02/2014 - 6:05am -- tim

If hospitals are going to be paid based on keeping the people they serve healthy — one of Vermont’s health care reform goals — they need to invest in primary care services, state regulators and hospital executives say. That’s difficult when their income is still dependent on billing for each patient visit or procedure they perform — what’s known as the fee-for-service model — especially when primary care is less lucrative than other hospital services.Hospitals, government and private insurers are actively adapting payments to meet that goal, but for the state’s smaller community hospitals the change can’t happen quickly enough.That’s because many are seeing a decline in the demand for their services, even as state regulators are pushing them to invest in the “population health” model of care.

Dr. Allan Ramsay of the Green Mountain Care Board. Photo by Morgan True/VTDigger

Dr. Allan Ramsay of the Green Mountain Care Board. Photo by Morgan True/VTDigger

“Everything is moving toward the hospitals’ accepting some risk for the total cost of care, so unless they address the health of the population, that risk will be catastrophic,” said Dr. Allan Ramsay, a member of the Green Mountain Care Board, which has regulatory authority over hospital budgets and the rates they charge.


Focusing on primary care is the best way to take on risk for people’s health, because of its emphasis on prevention, said Ramsay, a longtime family medicine doctor.

Vermont made primary care a policy priority almost a decade ago when it launched the Blueprint for Health in 2005.

The Blueprint supports the patient-centered medical home, a model for care coordination that has doctors work with nurses and case managers to meet a patient’s needs. A healthier patient will be less involved with his medical home, whereas someone with a chronic condition might be in daily contact with theirs.

In 2013, the Blueprint added 17 new physician practices, bringing its total to 121 practices serving 514,385 Vermonters, according to its annual report. The state’s total population is roughly 620,000.

“It’s an epidemic of health,” Ramsay said.

“Is that the best thing for Vermont? Yes. Is it the hardest thing for the payment system to adjust to? Yes,” he added.

Adapting to a healthier payment model

Government programs and insurance companies must find a way to offer stable payments to doctors, hospitals, community health centers and clinics to make population health a sustainable model.

Vermont received a $45 million federal grant in 2013 to help develop payments systems that will achieve that goal.

That money has supported the development of the shared-savings programs offered to Vermont’s Accountable Care Organizations, which are health care provider networks.

Shared-savings programs work by offering the network a set payment to serve a defined population and allowing them to split any savings with the entity making the payment — provided they meet certain quality standards.

OneCare Vermont is the largest ACO in the state with 112 participating health care providers. All 14 Vermont hospitals and the Dartmouth-Hitchcock Medical Center in New Hampshire provide specialty care for the network.

Roger Allbee, CEO of Grace Cottage, said OneCare CEO Todd Moore recently told him that there won’t be shared savings anytime soon, but “we think there is a benefit in the future,” Allbee said, paraphrasing Moore.

That benefit might not be realizing savings down the road, either.

Several hospital executives who testified at this week’s budget hearings suggested that in the future OneCare could be the arbiter of large-scale payments to finance the health care activities of its members.

A set payment from insurers or government programs, adjusted for trends in use and demographics, are often called “global budgets,” in health policy.

The attraction of global budgeting for state officials working to build a public universal health care program, often called single-payer, is understandable.

If state government takes over the majority of payments to the health care system, making one large payment might be seen as a way to simplify the program.

But stakeholders underestimate the complexity of global budgeting, said Joseph Woodin, CEO of Gifford Health Care.

The assumptions used to define a global payment would have to be checked at the end of the period the payment is meant to cover and trued up to match what actually happened, Woodin said.

The amount of granular adjustments to flesh out actual global payments for one hospital would be labor intensive, he said. Woodin did not speculate about how difficult it might be for the state’s health care system to complete the same exercise.

But he did point out that close to 20 percent of Vermonters health care is provided by Dartmouth-Hitchcock, which will further complicate Vermont-specific payment reforms.

Rutland Regional Medical Center came close to developing a global budget for Medicaid and some payments from commercial insurers, but the deal couldn’t be brokered before hospital budgets had to be completed.

Southwestern Vermont Medical Center had expressed interest in a limited global budget as well, but after hiring consultants to review the plan, decided it wouldn’t work.

A global budget won’t work for the Bennington hospital, said Stephen Majetich, Southwestern’s CFO. It has too many out-of-state patients and its utilization is in flux after the closing of North Adams Hospital in western Massachusetts.

In the future, there are going to be fewer health care dollars spread across more organizations, Southwestern CEO Thomas Dee said.

“In the past, we had control of a lot of the dollars in our area, and we’re going to have to learn how to share that, while remaining financially sustainable,” Dee said.

That’s led his hospital to expand its affiliation with Dartmouth-Hitchcock. Mt. Ascutney Hospital in Windsor has done the same, and other hospitals, such as North Country Hospital in Newport, are interested in new affiliations.

At the same time, Fletcher Allen Partners, the parent organization of Vermont Academic Medical Center and Fletcher Allen Health Care, has said it will look to integrate with other health systems in the state.

Another challenge to the population health model is finding enough doctors and nurses who are interested in doing primary care.

“I can’t emphasize enough the need for primary care in southern Vermont and north Berkshire County,” Dee said. The Bennington hospital will invest $1.3 million in primary care this year.

Part of the problem is that doctors are graduating with an average of $170,000 in debt, according 2013 figures from the Association of American Medical Colleges, and primary care salaries are often half those offered to specialists.

Integrating with an Academic Medical Center can also help with recruiting primary care practitioners. Fletcher Allen is starting a primary care residency at Champlain Valley Physicians Hospital in Plattsburgh, New York.

A person’s health is often tied to lifestyle choices — diet, smoking or consuming alcohol — and holding the health care system accountable for people’s wellbeing begs the question of how much of health outcomes are within the control of doctors and nurses.

Dr. Karen Hein had begun work on how to meld public health with health care, but her departure from the Green Mountain Care Board on Sept. 30 means someone else will have to take up that mantle.