Vermont All-Payer ACO Announcement:

The Promise and Challenges of Alternative Payment Models


On October 26, 2016, the Centers for Medicare & Medicaid Services (CMS) announced the Vermont All-Payer Accountable Care Organization Model, a five-year project scheduled to run from January 2017 to December 2022. CMS will make available $9.5M of start-up funding to Vermont in 2017 in order to support care coordination and bolster collaboration between practices and community-based providers.

As envisioned, this model will be the most extensive ACO model in the country, dramatically increasing the scope of providers and services from the initial all-payer model launched by CMS in Maryland in 2014. The Vermont ACO model is designed to build ACO participation across government and private payers, with a target of having 70 percent of all Vermont insured residents (including 90 percent of all Vermont Medicare beneficiaries) attributed to an ACO by 2022.

The model targets improved outcomes and reduced cost growth. Outcomes will be measured across three categories: Population-level Health Outcomes Measures and Targets, Health Care Delivery System Measures and Target, and Process Milestones, while health care expenditure growth is targeted to be limited to 3.5% for major payers and Medicare cost growth held to 0.1% to 0.2% below projected national Medicare growth. Provider participation in the program is voluntary.

In announcing the model, CMS Acting Principal Deputy Administrator Patrick Conway and CMS said, “This model is historic in terms of its scope, aiming to include almost all providers and people throughout the state in an all-payer ACO model to drive improved quality, better care coordination, healthier people and smarter spending.”

Within Vermont, which has been active in promoting statewide health reforms—most notably considering (but ultimately failing to implement) a single-payer system in 2014 and becoming the first state to file a 1332 waiver to get an exemption from ACA regulations—the statewide ACO model has received broad support.

The Green Mountain Care Board, the independent, quasi-regulatory entity established by the state legislature to reduce health care cost growth and ensure the maintenance of a high-quality, accessible health care system, noted the letters of support that it received from payers, providers and employers throughout the state, including the Bi-State Primary Care Association, Blue Cross Blue Shield of Vermont, OneCare Vermont, the UVM Health Network, the Vermont Medical Society and the Vermont Association of Hospitals and Health Systems.

“Together, we are writing a new prescription for the health of Vermonters: pay health care providers for keeping people healthy instead of just treating them when they’re sick,” wrote Dr. John Brumsted, the CEO of UVM Health Network, one of the largest providers in the state. “This is a change the UVM Health Network is committed to making.”

Jeff Tieman, the CEO of the Vermont Association of Hospitals and Health Systems wrote, “The provider-led model focuses on community wellness and keeping people healthy, and it includes incentives for care coordination and chronic disease management.”

Governor Peter Shumlin, who led the charge for a single-payer system in 2014 and called the failure to enact that system “the biggest disappointment of my political life,” released a statement that read in part, “Vermont will now become the first state in America to ensure that your doctor can focus on keeping you healthy, rather than running tests or procedures.”

However, even with the broad support received from CMS and within the state, there are questions regarding the ability of the Vermont ACO model to achieve its goals. While Vermont has been seen as a leader in health reform, the track record of these efforts has raised concerns:

“With respect to cost savings, the all-payer model places its faith in the ability of accountable care organizations (ACOs) to better coordinate care to reduce costs. The problem is that the largest ACO in Vermont, OneCare, has already tried and failed to do just that. OneCare failed to prevent what is termed in the industry as “excessive cost increases in its Medicare population” in any year since its inception, despite a handsome $9 million annual budget, equivalent to over $160 per Medicare patient. Indeed, only about 25 percent of ACOs nationally generate shared savings and nearly as many have gone in the opposite direction.

Other constituents in Vermont health care reform have fared even worse. Just as OneCare was failing to reduce costs, from 2010 to 2015 under the Green Mountain Care Board’s oversight, the budgets of Vermont’s hospitals increased by 26 percent. Related initiatives such as Vermont Health Connect and Vermont Information Technologies Leaders (VITL) will have spent over $500 million, or over $800 per resident, by the time the all-payer model takes effect in 2018. The state has failed to show how these massive administrative expenditures have reduced the cost of care or improved the quality of the health care its citizens receive.

If Vermont hospitals and ACOs, enabled by administrative largess and expensive IT infrastructure cannot reduce the cost of patient care today, how will they do better under an all-payer model?”

Beyond the issues of managing costs, the Vermont ACO model has raised concerns among physicians regarding the potential economic impact on physician practices. Al Gobeille, the Chair of the Green Mountain Care Board, noted this concern at a town hall meeting where he said that private practices might face bankruptcy “because they couldn’t make it work in the independent practice world.” The lack of details on physician payment led HealthFirst, one of the largest independent physician associations in the state, to withhold their support for the model. The Vermont ACO model also faces political challenges as Lieutenant Governor Phil Scott, one of the two candidates running to succeed the retiring Gov. Shumlin, has already voiced his skepticism to the plan.

In these cases, the lack of details presented for the model, the mixed record of the state in managing previous reform efforts and the broad scope of the model have led to questions, despite an overall broad level of support.

With HHS having exceeded its 2016 goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models in March, it is now aiming towards its next target of 50% of payments to these models by the end of 2018. The Vermont ACO model highlights the potential opportunity, and issues will need to be overcome as CMS attempts to transition reimbursement to alternative payment models more broadly.

Hospitals and physicians are already feeling the strain of the current pace, and questions continue to be raised regarding the effectiveness of these models in improving outcomes and managing costs. Additionally, these programs are not immune to politics. How CMS navigates the growth of these programs and the issues around them to ensure both performance and scalability will be essential to the long-term success of these programs.

Healthcare Payment Specialists

Healthcare Payment Specialists

Founded in 2002, Healthcare Payment Specialists (HPS) provides technology enabled solutions for health care eligibility, government reimbursement and compliance to hospitals and healthcare systems across the country. Using its STINGRAY software platform, HPS delivers solutions on a software-as-a-service (SaaS) basis or through outsourced service engagements.
Healthcare Payment Specialists