The first of its kind in the nation, the all-payer accountable care organization (ACO) model allows Vermont the opportunity to create a transformative payment model that moves all payers (Medicare, Medicaid, and commercial) towards a prospective, value-based reimbursement system holding providers, operating through one or more ACOs, and the State of Vermont, accountable for population health outcomes. A joint state and federal initiative designed to transform how health care is paid for and delivered in Vermont, the model agreement is the culmination of nearly two years of discussion and negotiation between the Governor of Vermont, the US Department of Health and Human Services, the Vermont Agency of Human Services, the Centers for Medicare and Medicaid Services (CMS), and the Green Mountain Care Board (Vermont’s quasi-judicial, independent body responsible for health care regulation and reform).

The agreement includes Medicare Physician and Hospital services and their Medicaid and commercial equivalents. During the agreement performance period (2017-2022), the state will add Medicaid long-term institutional services and create a plan for the inclusion of Medicaid mental health and substance abuse services and long-term services and supports. Concurrent with the All-Payer Model Agreement, the state was granted a five-year extension of its section 1115(a) Medicaid demonstration, providing the necessary authorities to make Medicaid a full partner in the Vermont All-Payer ACO Model.

To realize the potential of the aligned payment model, the agreement proposes an incremental approach to participation, culminating with 70 percent of all Vermonters and 90 percent of all Medicare beneficiaries attributed to one or more designated all-payer ACOs by the end of 2022. Achieving this scale in a value-based payment model is essential to incentivize health care delivery redesign and cost containment. Vermont will hold the growth of all-payer per capita health expenditures to 3.5 percent in aggregate across the performance period and will limit Medicare growth to 0.001-0.002 percentage points below the projected national average. The State has identified three population health goals that it believes can be reached through changed incentives and delivery system redesign: increased access to primary care, fewer deaths from suicide and drug overdose, and a reduction in the prevalence of chronic disease.

In what follows, we (the members of the Green Mountain Care Board and its lead negotiator) highlight our rationale for supporting the Vermont All-Payer ACO Model.

Provider-led Reform

One of the most important components of the All-Payer ACO Model is that payment and delivery reform efforts are provider-led and participation in the ACO is voluntary. Health care decisions should remain in the hands of providers and patients — the model simply aligns provider financial incentives with the state’s health care delivery and population health goals. Success of the model depends on the ACO’s ability to make participation attractive by setting reasonable and predictable reimbursements, easing administrative burden, providing increased support for chronic care management, facilitating the integration of community services, offering providers access to data analytics, and disseminating information about best practices and evidence-based medicine, and creating a strong and attractive primary care model.

Patient Choice

Another important component of the model involves patient freedom of choice. The All-Payer Agreement does not restrict access to providers (inside or outside the state) nor does it impose benefit restrictions or increases in cost-sharing. As dictated by federal law, Medicare beneficiaries maintain current coverage with no change to cost sharing or provider access. Notably, under the All-Payer Agreement, Medicare beneficiaries attributed to an ACO will enjoy enhanced coverage for post-discharge home visits, skilled nursing care, and the telemedicine access available through Medicare’s Next Generation ACO program. In addition, Vermont’s agreement creates a clear path to propose potential unique payment waivers that could allow additional Medicare benefit enhancements.

Restructuring Provider Incentives to Reward Quality Not Quantity

By relying on prospective, value-based payment, the model aligns providers’ financial and quality incentives with the goals of eliminating costly waste in the system stemming from overtreatment and failures of care coordination. An integrated, unified care delivery model may improve the likelihood of widespread adoption of programs that assist providers and patients in making smart decisions about their care, such as Choosing Wisely. The ACO-based delivery model envisioned by this agreement, paired with a payment model that no longer rewards providers for each discrete service that they perform, creates a promising environment for the health care system to more fully embrace Choosing Wisely and other similar initiatives.

Enhancing more Integrated and Coordinated Care

The All-Payer ACO Agreement also provides structure and resources to encourage better coordination of care. Building on the success of the patient-centered medical home initiative, Vermont’s ACOs are poised to empower its care management teams to improve outcomes, refer patients to needed social services, and help prevent unnecessary, duplicative, and even harmful treatments. The agreement includes approximately $7.5 million dollars, trended forward annually, to continue funding for Vermont’s proven primary care patient-centered medical home and prevention programs, the Blueprint for Health and Support and Services at Home (SASH).

Cost Containment

Health care costs are outpacing inflation and medical care is consuming a greater and greater share of household and state budgets. Actuarial analysis by GMCB consultants suggests that achieving both the all-payer and Medicare expenditure growth targets are feasible over the six years by eliminating waste and reallocating health care dollars to more cost-effective care. The model includes protections to account for Vermont’s rapidly aging population, the potential for increased prevalence of costly End-stage Renal Disease, and lower than expected national Medicare growth.

Incentives to Improve Care Delivery and Health Outcomes

The All-Payer ACO Agreement holds Vermont accountable for a carefully selected set of metrics that relate to access to primary care, prevalence of deaths due to suicide and drug overdose, and prevalence and treatment of chronic disease. A focus on these metrics will reward high quality care and direct health care resources towards preventive services and population health improvement initiatives. Under the current fee-for-service system, there is no incentive to ensure that these important outcomes, delivery system measures, and process milestones are achieved. The All-Payer ACO Model, on the other hand, is based on the premise that incentives matter and providers adjust care to meet target outcomes.

Local Control

The agreement provides Vermont with federal resources and more flexibility to achieve better health outcomes on a localized level. Locally designed measures and a provider-led ACO ensure that the model is right for Vermonters and their health needs. By moving the management of care more directly into the hands of local providers, the goal is to better allocate scarce resources towards their most impactful use and the greatest community need.

This local control, however, is not a mandate; providers retain the option to remain in fee-for-service reimbursement. While customized to Vermont, the model contributes toward CMS’ goal to link 50 percent of Medicare payments to alternative payment models by 2018. ACO’s participating in Vermont’s All-Payer ACO Model can be deemed Advanced Alternative Payment Models, thus guaranteeing participating ACO providers a 5 percent incentive payment under the Advanced Alternative Payment Model (APM) track of the Quality Payment Program (QPP). Non-participating providers who treat Medicare patients will be subject to reporting under the new Merit-based Incentive Payment System (MIPS) and will receive performance-based adjustments that increase incrementally but range from +/- 4 percent in 2019 to +/- 9 percent in 2022.

No Financial Penalties and Easy Exit Strategy

If Vermont fails to meet the financial targets or population health goals, there are no financial penalties. Instead, the Federal Government would work with the state to create a corrective action plan to better achieve the goals laid out in the agreement. Ultimately, if the All-Payer ACO Model is deemed unsuccessful by the state of Vermont, there is a clause that allows Vermont to exit the agreement with 180 days written notice and no penalty.

Vermont’s Next Steps

Approval of the All-Payer ACO represents a monumental and potentially transformational shift in health care in the state of Vermont. Nevertheless, the hard work of implementation lies ahead and will require continued statewide conversation, collaboration, and compromise. As a comprehensive Advanced Alternative Payment Model in the era of MACRA, we believe this Model represents Vermont’s best hope to contain costs, increase access, and improve quality. We are now, finally, at the beginning.