Feb. 27—A statewide initiative to overhaul care delivery in Vermont has cut the cost of care for participating patients, but also has cut into the bottom lines of the state’s hospitals.

Vermont’s Blueprint for Health uses payer-funded medical homes and community supports to bolster healthcare outcomes for a growing population of both commercially and Medicaid-insured patients. By 2012—the third year of the program and the first year that state organizers considered the program to have a large enough patient population to draw meaningful conclusions—nearly 250,000 residents of the sparsely populated state were included.

The results in 2012 included savings compared to control populations that ranged from $29 for each Medicaid-enrolled child to $586 for each commercially insured adult participant, according to the program’s annual report released earlier this month. Total 2012 savings of $99.6 million were obtained on $8.8 million of spending by payers on the initiative.

The downside for the 14 Vermont hospitals that helped lead the initiative and direct most of the community support programs was that a large part of the savings came from reduced hospital spending.

The results are not surprising because reduced admissions were “a primary goal” of the initiative, said Craig Jones, MD, executive director of the program.

Expenditures generally dropped across all categories of care for all patients types, but hospitals achieved big savings in some areas. For instance, reducing hospitalizations by 31 percent compared with the control group provided the bulk of savings for underage Medicaid beneficiaries, according to the report. Similarly, 20 percent lower inpatient spending among commercially insured adults helped drive savings among those patients.

Some outpatient hospital services, such as screenings, increased, but not enough to keep that spending category from also declining.

Hospitals “are seeing a financial hit” from the initiative, Jones said in an interview with HFMA, “But it hasn’t made them want to pull out.” 

Why Hospitals Stay

Hospitals pushed to launch the initiative and stay with it despite the revenue losses because the care coordination lessons it provides has helped inform many of their other cost-savings efforts, such as how to better perform under accountable care organizations. 

Hospital CEOs “saw there was going to be a change in health care, and they wanted to be part of it,” Jones said.

Hospitals have not complained to Jones that the initiative is weakening their solvency or asked for any offsetting compensation.

The blueprint is “a step on the way” to global payment models that will allow hospitals to financially benefit from reducing the costs of patients’ care, he said. In Vermont, the move toward capitated or global payments is expected to come within its move toward a single-payer model, which is expected around 2017.

Among the lessons the 14 Vermont hospitals learned was how to overcome cultural barriers to working closely with independent physician groups as part of the medical home model and multidisciplinary community health teams, Jones said. Engaging independent physician groups proved to be an easier task for smaller hospitals, Jones said, because they have a tradition of working closer with other providers in the community. 

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter @rdalyhealthcare.


Publication Date: Thursday, February 27, 2014