The odor of scorched tires, faint but unmistakable, figuratively hung over last week’s meeting between the Green Mountain Care Board and representatives of Vermont’s hospitals. For the first time, the rubber began hitting the road on health care cost containment in the state, the linchpin of Governor Peter Shumlin’s single payer reform initiative.
Hospital officials reacted to the Board’s announcement in late December that it was considering setting a target that hospitals could increase their budgets 3.1 percent for the fiscal year that take effect next October. That number would be less than half the 7.1 percent increase the hospitals got in the current budget year.
More alarming still to the hospitals was the Board’s apparent determination not to guarantee in advance that it would exempt various costs from the budget requirements. In the budget for the current year, various costs such as the purchase of doctor practices and steps toward reform were not counted against the board’s target.
The reaction from the hospital industry was immediate and negative.
Bea Grouse, the president of the Vermont Hospitals and Health Systems, said in a letter to the Board that her group "strongly" opposes the proposed target. "It would place all Vermont hospitals in the untenable position of abiding by this mandate or abandoning its missions," she wrote.
"The proposed 3.1 percent revenue target without exemptions is, plain and simple, a budget axe-a move that takes us backward on health care reform," she wrote. "Hospitals will be forced to make changes to access and services in order to survive, rather than to advance to health care reform."
Responses from several individual hospitals were more measured, but all said that their institutions needed the so-called "off ramps," or exclusions, in constructing budgets that would pass muster.
At least two of the five-member board emphatically weren’t buying.
Allan Ramsay, who spent 30 years as a primary care physician at Fletcher Allen Health Care in Burlington, told the gathering he believes that it’s critical that the Board carry out the mandate from the Legislature to get costs under control.
"We have a moral responsibility here…to make a basic health care benefit available to all Vermonters at a cost they could afford," he said. It is "morally reprehensible," he said, "that Vermonters do no have that basic health care benefit because it’s not affordable."
Testimony before the Board about the experience in places like Rhode Island, Maryland, Rochester, N.Y., and Massachusetts supported the proposition that health care systems can thrive under tough financial performance targets, Ramsay said. And he pointed out that the Board’s consultant, Bob Murray of Maryland, had told them the single most important thing they could do to meet their moral responsibility is to set an inflation target in the 3 percent area and stick to it.
"Now, if hospitals continue to believe that filling every bed, maximizing every reimbursement (for care provided), keeping every MRI and CT scanner in use, using their electronic medical record to upcode every emergency room visit: if that’s what they believe is the path to their success…they’re going to have problems with whatever target we set," he said.
Ramsay also said, however, that he is optimistic about the chances of reform because he has talked to fellow doctors all over the state and that they want to move on reform. "They do want to change their behavior," he said, "do believe in the moral responsibility they have."
A second member of the Board, Al Gobeille, came to the same conclusion from his perspective as a Chittenden County businessman. Gobeille said that he had been struck by a chart he had seen in the Wall Street Journal showing that while nearly every business sector in the U.S. had been hard it by the 2008 recession, health care and higher education had kept booming right through the crash.
The charts showed growth years in green and down years in red, Gobeille said. His own industry, the restaurant business, was green until 2008 when it turned to red and didn’t get back to green for four years.
"And the health care chart, I’m sorry guys, but it was green, green, green, green, green-there was no recession in the health care industry," he said. The reason, he said, is a characteristic central to both industries:
"There’s no one to tell anybody, ‘No,’ and if there’s nobody to say no, it’s easier to say yes to the person asking for a pay increase or for their department to have a pay increase, because there’s nobody complaining. … So there might be pain in this, there might need to be pain in this because everybody didn’t see green and the people who didn’t see green are struggling to pay for the entities that did see green."
"I think as citizens we have to impact the things we come together to do," he continued, "and paving the roads in Shelburne is one of them and health care is one of them, as well. And the people in this room-we have to figure out how to do this and a little friction won’t be a bad thing. That might not be a nice but that’s just true in budgeting."
The hospital case made a little more headway with board member Con Hogan, who said that the Board clearly has a mandate to control costs, but they don’t have to get to the sustainable level in one year. "Over two or three years if we get to that point we’d have done something major and important," he said.
A fourth member, Karen Hein, was much more impressed by the hospital case. "A lot of people didn’t like that," she said of the proposed target. "The ideal situation would be the people most involved to come up with your best ideas of how to do this."
She said that such a process might include processes like cost-based accounting to determine the financial dynamics of hospital budgets. An example would be the University of Vermont’s medical college, which is an integral part of the Fletcher Allen Health Care budget. The board needs to come up with a way to deal with that, she said.
So, the lines are pretty clearly drawn. Anya Rader Wallach, the chair of the board, who did not give her views on the target issue, said the board will meet again on Wednesday to at least discuss the issue further and possibly come to a decision.
Whatever the outcome, it won’t be easy. And it will be long time before the aura of burning rubber clears from the board’s conference room.