Vermont's health care experiment could serve as a national model, especially in rural areas

Vermont, one of the nation's most rural states, has launched an ambitious "experiment that could transform the delivery of health care nationwide," Michael Ollove reports for Stateline. The state is replacing the traditional "fee for service" system where doctors and hospitals are paid for each procedure, treatment or test they provide in favor of a "pay-for-performance" system. Studies have shown that pay-for-performance is more successful in rural areas, because fewer competing insurers and hospitals make it easier to coordinate the system.

"Under Vermont’s plan, to be phased in through 2022, health plans would pay doctors and hospitals based on how well they care for their patients and contain costs, rather than on the volume of services they provide," Ollove writes. "Some health care plans, public and private, have been experimenting with 'pay-for-performance' systems for more than a decade. But Vermont’s experiment is the most ambitious, aiming to cover 70 percent of the state’s residents (excluding those who are in out-of-state employer-sponsored plans), whether they are beneficiaries of Medicare, Medicaid or commercial health insurance."

Organizations "that choose to participate in Vermont’s experiment would join one of two 'accountable care organizations,' or ACOs, which are groups of doctors, hospitals and other providers who combine to coordinate the care of their patients," Ollove writes. "At the beginning of each year, Medicare, Medicaid and Blue Cross Blue Shield (Vermont’s dominant private insurer) would pay the ACOs a per capita amount to cover the care of each patient. Participating providers would earn financial rewards for staying under budget, and for meeting standards of high-quality care."

"The ACOs have agreed to limit spending growth to about 3.5 percent a year for the five years of the experiment. (The national growth rate for health spending in 2015, the last year for which data is available, was 5.8 percent.)," Ollove writes. "As a reward for staying under budget, ACOs would receive up to three percent of the amount they were budgeted. If they miss the targets, they would have to pay a penalty of up to three percent." The model doesn’t count spending on prescription drugs.

"Because payments will be based on the health outcomes of patients, the architects of Vermont’s all-payer model think doctors and hospitals will provide services they forgo under a fee-for-service system because they are not paid for them. Some of those services will not only benefit patients, but save money in the long run," Ollove writes.

Another key is that all "providers in the ACOs will use the same electronic health record system, allowing for seamless communication between hospitals, practices, home health agencies and nursing homes. The single system will make it easier for providers to share what works best for each patient." (Read more)