 Jennifer Carvey, Legislative Council. I am here to help you to elect a chair under your statute. For this committee, the committee is required to select a chair for a moment's members for the first meeting of each biennium. So we do have a number of non-members joining today. So it would just be the named members of the committee who would be voting. Are there any nominations for a chair? I will nominate Senator Lyons, right? I'll set his chair. Any other nominations? Any discussion? Alright, so Senator Lyons has been nominated as chair. All those in favor? Aye. All those opposed? Break. And I will turn it over to Senator Lyons. Thank you very much. Thank you all for being here. So this is a track meeting. As you know, we have been pursuing healthcare reform. We've been working very hard on our ACO and all-payer value-based healthcare payment reform. The intent of the legislation that we've been pursuing and the work that the Green Mountain Care Board and the administration and others have been doing is very much in line with looking at how we can control costs, increase of costs, provide increased access to care and to improve quality of care. So the goal today relates to a letter that was sent by the Green Mountain Care Board chair representing the board to the administration regarding $13.1 million to be added into Medicaid. So what we are doing today is listening as a committee so that we can understand a little bit more about the progress that's being made in reform efforts, but most specifically to understand the additional, the request for the addition of $13.1 million. Now you all have letters that were sent to the Green Mountain Care Board, to the administration, and to one care, the ACO. We also have responses and we'll hear from those folks as we go forward. We have, before we hear from our in-state experts, we have expert witness, two witnesses, by telephone. And so I'm going to, since we're right on time, we'll let Theresa dial in one at a time. The first one is Dr. Chavis White of the RAND Corporation who has done some research on hospital costs and pricing. He's going to talk a little bit about the report that was just recently put out by the RAND organization. He can jump on anytime, so it's a conference call. Technology is wonderful. Dr. White, good afternoon and thank you for being here with us. This is Senator Jenny Lyons. We've talked previously on telephone. And around the table are members of the Health Reform Oversight Committee, members of both the House and the Senate, who are very interested in listening to the testimony that you have prepared for us. So I am going to turn it over to you. And we have about 45 minutes. So if there's time after your presentation, we'll open it up for a few questions. Thank you. Can I ask first, are you able to see the flat deck that I shared around by email earlier today? Yes. We don't have it on the screen. We have it in a hard copy. Okay, that's even better. Okay, great. So first let me thank you for inviting me to speak to the group there. And just to give a little background on where I'm coming from, I'm a health economist working at the brand corporation. And I started my career at the Congressional Budget Office, analyzing federal health reform proposals. And then I've worked at a couple think tanks here in D.C. and I've spent many years analyzing trends and patterns in spending in the Medicare program and also among the commercially insured. And I was part of a team at RAND that did an analysis of the incidence of health care spending in Vermont that came out in 2015. And I think that may be one of the reasons you all, you know, were aware of the work we've done is that connection with RAND from 2015. But let me just jump into talking about Medicaid and the hospital cautious. And one point I think before we jump into any other content, I'm more than happy to answer questions as we go along. I'm not sure if the standard protocol is to hold questions until the end. I'm fine with that as well. But especially just calling in on the phone, I feel better if I hear questions until I know there's some, you know, interaction going on. So let me go first to the first slide on the context. So I want to focus mainly on Medicaid hospital payments and the hospital cautious. But I think it's also important just to set the table for the big picture pressures and the healthcare system. And the first slide is illustrating the growth in premiums for employer-sponsored health insurance over time. And there's a New York Times article where the headline kind of summarized the obvious takeaway that employer-sponsored health insurance is increasingly unaffordable and based on numbers from the Kaiser Family Foundation, the average premium for a family in employer-sponsored insurance broke through the $20,000 mark this year. And based on some numbers that I've seen from a HRQ, Vermont's premiums are probably a bit above that national average. So above $20,000 for a family premium. That's the first important piece of context. And then the next is, if we go to the next slide, I've plotted the trends in the ACA exchange premiums. This is the average benchmark premium. So this is the second lowest cost silver premium for a 40-year-old non-smoker. And Vermont is the red line, which has been steadily trending up. The national average is the blue line. And obviously there's a lot going on driving premiums in the ACA market, including silver loading and so on. But Vermont is clearly well above the national average in the ACA exchange premiums. So those two trends and the levels of employer-sponsored health insurance and ACA premiums I think are important factors to have on the table. The third piece of context that I would want to draw attention to is if we go to the next slide. Before you go to the next slide. This is going to be difficult, but now that you've given a license to questions during the presentation, we're going to have short questions, very short questions and answers during the presentation and save most of this for after. So Representative Donahue has a question. Thank you. I think you partly answered this, but our big jump from 2018 to 2019, silver loading is kind of hard to capture in terms of did the actual cost to people, what was the actual increase versus for purpose of silver loading? Would that be accurate that that probably, in some part to capture ways, is attributed significantly to silver loading? Yes, my sense is that the move to silver loading is a big driver of the jump from 2018 to 2019, although I should also say I haven't dug into the rate pilings enough to get a sense of how big that premium growth would be without it. Thank you. So going to the next slide on the large divergence in public versus private hospital prices. So premiums in the employer sponsored insurance market and in the individual market are growing fairly rapidly over time and one of the key drivers of growing premiums for the privately insured is the prices that private health plans are paying to hospitals and this slide showing the large divergence in public and private hospital prices is one of the key slides from the study that we put out in May of this year where we took private health insurance claims data, mainly from folks in employer sponsored health insurance plans and we repriced them using Medicare's payment formulas and then calculated for individual hospitals and also for different states what's the level of private negotiated prices for hospital services relative to Medicare. And the top line finding from that study was that private health plans have negotiated prices that are on average 241% of Medicare and I have some data for Vermont where Vermont is just a bit below 225% of Medicare so there's a very large gap between what private health plans are paying to hospitals and what Medicare is paying to hospitals and this is an important background fact for discussion of the cost shift and Medicaid payments. So overall I would say that there's an affordability crisis in the U.S. healthcare system for the privately insured and for folks who are in employer sponsored health insurance premiums and out of pocket are a large and increasing share of overall income in the individual market. Premiums are rising and the prices that private plans are paying hospitals play a major and direct role in those premium levels. So now let me go to the next slide. We will overview where I want to actually dig into the questions that I think you all are focusing on and that prompted reaching out to me for this testimony today. So the overarching question that I picked up from the materials I've read is would boosting Medicaid payments to hospitals lower private premiums and in trying to think through that question I broke it out into four hopefully more manageable sub-questions and the first sub-question is do hospitals costs determine their revenues or do hospitals revenues determine their costs and when we get into the discussion I'll make sure to define these terms more clearly. The second sub-question is do public insurers underpay hospitals or do private insurers go for pay hospitals? The third sub-question is do hospitals in Vermont operate efficiently? And then the fourth question is the question that brings us together would increasing Medicare prices lower private health insurance premiums and then I'll do a little wrap up. So let me go to the next slide. So the question one, do hospitals costs determine revenues or do revenues determine costs? So first let me work through some definitions because these words can be used in a number of different ways and I want to make sure that I'm at least trying to be clear on what I mean when it needs these words. So costs, like costs, I'm referring to the expenses that hospitals incur providing patient care so that's mainly the labor involved in providing hospital services but it also supplies land, electricity and so on. That's what it costs the hospital to provide the services. Revenues on the other hand are the payments to the hospitals for providing patient care. And then the next definition is a payment to cost ratio. That's the ratio of revenues over cost. So that's the measure of how generous hospitals are being paid relative to what it costs them to provide services. The next term that I want to define is price. The concept there is that the revenues that a hospital receives per service are provided with adjustment for case mix where case mix is a measure of the complexity and intensity of services provided. And then the other two definitions are when I say public insurance I'm referring to Medicare and Medicaid and Jeff I would pulled into Medicaid. Private insurance is employer sponsored health insurance and ACA exchange plans. You could also include short term limited duration plans and so on. But the public private insurance split is getting between Medicare and Medicaid on one side and employer sponsored and ACA plans on the other. And we just pause there and ask if there are questions on the definitions before we get into some of the trends and analytics. We're all good. Thank you. Okay. So the next slide is displaying trends in payment to cost ratios for the privately insured versus Medicare and Medicaid. This figure comes from the American Hospital Association and what you can see is that since the mid 1990s or early 2000s there's been a growing divergence between how generously private insurers are paying hospitals versus Medicare and Medicaid. What this figure doesn't tell you though is why the gap is growing and it doesn't tell you whether private insured payment rates are rising rapidly or if public insurer payment rates are falling. So to be able to interpret these trends we need some additional information and if you go to the next slide on interpretations of the divergence in payment to cost ratios I'll tell you there are two stories you can tell about the growing gap in payment to cost ratios. The first I would call price discrimination and the story there is that hospitals over time have been able to negotiate high and growing prices with private insurers they're using their market leverage enabled by growing consolidation on the provider side and that those high and growing prices paid by private health insurance plans are boosting hospitals revenues as hospitals bring in higher revenues that allows their cost to rise and that as hospitals cost rise that makes public insurers payment to cost ratios look worse and worse over time. So that's one story that I call the price discrimination story. Dr. White, it might be helpful for you to define hospital in the context of your article and your presentation because I think you talked about community hospitals. Yes. The data and the analysis that I'm presenting is focusing on short term general medical and surgical hospitals so that would exclude specialty facilities like psychiatric hospitals or VA medical centers but most of the hospitals that you would think of would be included in this definition of hospital. Thank you. So the second interpretation of the divergence and payment to cost ratios are called cost shifting and the story there is that hospitals costs are fixed and that hospitals have to figure out how to bring in revenues to cover those costs and that if public insurers are undermining hospitals that hospitals are more or less forced to negotiate high income prices with private insurers. So those are the two interpretations of the divergence and the payment to cost ratios that we see and let me go to the next slide on evidence on price discrimination versus cost shifting. My read on the evidence is that there's more weight behind the price discrimination story than there is behind the cost shifting story. I think one of the complicating factors here is that if you go back to the 1960s or 70s we had a cost reimbursement system for hospitals where Medicare and Blue Cross Blue Shield plans were set up to reimburse hospitals for whatever their costs were and the Medicare program moved away from that to the DRG based system starting in the 1980s and private insurers had moved away from cost reimbursement starting with the managed care revolution in the 1980s and 90s but the mindset of cost reimbursement I think still lingers on in the industry and the hospital industry is unusual in that I see hospital executives coming at customs of financing from the perspective of who's going to cover their costs and that they're entitled to have their costs reimbursed by someone and if it's not public payers then it must be private payers even though the market has moved on from that cost reimbursement approach that mindset still lingers on so getting into some of the evidence on the price discrimination and cost shifting stories the first piece of evidence I would point out is analyses of hospital costs how much do hospitals spend to provide patient care those costs are not fixed my read on the evidence is that hospitals can adjust their costs up and down depending on the revenues that they have coming in one of the important background fact here is that the hospital industry is dominated by nonprofit institutions which by definition they don't have shareholders they aren't distributing dividends we shouldn't expect them to be minimizing costs in order to maximize profits and then distribute those profits hospitals and nonprofit entities it makes more sense to expect that if they are able to obtain a certain level of revenues that they will figure out a way to spend most of all of those revenues and not to be gr forth about it but I think hospitals like any industry they can always find something additional to spend on to buy if they have additional revenues coming in to support it so that's one factor the second is that there's a study that I've cited that came out in 2014 where I looked at hospitals cost their expenses in providing patient care and I looked at hospitals that faced growing constraints from Medicare versus hospitals that faced a left constrained Medicare reimbursement environment and what turned out what showed up very clearly from the data was that hospitals that faced a more constrained revenue environment produced their expenses relative to hospitals with a left constrained revenue environment that reinforces to me the notion that hospitals can adjust their expenses up and down depending on what revenues they're able to obtain I've also cited an article by Jeff Stenflund who's with the Medicare payment advisory commission and a couple co-authors where he laid out a very convincing case for the fact that some hospitals because of their market leverage are able to obtain high prices from private insurers those high prices bring in greater revenues to the hospital that enables hospitals to allow their cost to ride and that the rise in hospitals cost ends up making Medicare and other public payers look relatively less generous but that the issue isn't so much that public insurers' payment rates are low and falling but more that private and grown private prices are bringing revenues to allow hospitals costs to grow over time the second point that I think supports the price discrimination story is that there's growing evidence that the prices that private insurers pay are influenced pretty strongly by hospitals market leverage and that hospitals that enjoy strong negotiating leverage are able to negotiate higher prices and the flip side to that is that hospitals operating in an environment where there's a highly dominant private health insurer tend to get paid lower prices and that's because the insurer has more negotiating leverage so the fact that prices pay by private plans vary in a systematic way with the degree of market leverage and not just based on external factors affecting hospitals costs reinforces the price discrimination story and then the third point I think here is I cited a study that came out in 2013 where I took data on prices paid by private health plans and I looked at changes in Medicare payment generosity to different hospitals and I looked at the question of whether when Medicare reduces its payment rates does that lead to increases in prices paid by private health plans and the findings there was actually contrary to the cost shifting story the evidence showed that when Medicare lowers its prices that if anything private insurers pay somewhat lower prices as well as a result so all of those pieces of evidence support the price discrimination story behind why we see a large and growing difference in prices paid so let me go to the next question which is do public insurers underpay hospitals or do private insurers overpay hospitals and let me go to the first figure here public prices for hospital and patient care have been growing in line with inflation whereas the prices that private health plans are paying have been rising more rapidly than inflation so this is a screenshot from a study that I put out with co-authors the lead author was Tom Selden at AHRQ and we took the maps which is a large healthcare survey and we adjusted hospital and patient prices for inflation and patient characteristics and the complexity of services and then we tracked trends in those inflation prices for the privately insured versus Medicare and Medicaid and what plus out of all this is Medicare and Medicaid the prices may have been paying have been tracking more or less in line with overall inflation whereas for the privately insured those prices have been growing faster than inflation and this study ends in the year 2012 but this general pattern of Medicare and Medicaid more or less keeping up with inflation and private health insurance plans paying prices that are growing more rapidly than inflation that holds for the period after 2012 as well so that suggests that the issue here is that private health insurers are paying prices that are high and growing faster than inflation it still doesn't conclusively settle the question of whether private insurers are overpaying or public insurers are underpaying but it does suggest that private insurers their prices are at least growing up in line with inflation, overall inflation Dr. White Dr. White, I apologize for interrupting you but we have a question on the previous slide and I think we probably have to catch it now and then before I forget it my name is Janet Ansel and this is really on this I'm very interested in the presentation of the slide entitled Evidence on Price Discrimination versus Clash Shifting and I'm interested in the various studies that you said and I guess the question I have is if I were making an argument that this is really cost-shifting, not price discrimination what would I say? Who is making that argument and where are the studies to support the cost-shifting argument? The cost-shifting argument okay, let's see Al Dobson is a researcher who's done a well-respected researcher who's done a lot of work for the hospital industry and Keyham that's kind of a famous article called The Pain and the Cost-Shift Hydraulic I think it's called and I'm happy to email around that article, the PDF and the citation as well and that article basically starts with the premise that the gap between what public and private insurers are paying is reflective of the cost-shifting dynamic and he just quantifies the amount of money in the cost shift but it describes that cautious phenomenon as if it were given or not it doesn't really cast a cautious phenomenon it just takes it as a given and describes it and quantifies it and did you say that he did this work for the hospital industry? Is that what I heard you say? Yes, I believe so and I can try to find some other citations but a lot of materials that the National American Hospital Association and the State Hospital Association put out kind of takes cost-shifting as an article of hate and they don't so much set out to test it empirically but they more start with the assumption that hospitals costs are fixed and that if private insurers are paying more that that's because public insurers are underpaying and the typical storyline is to cite the fact that Medicare only covers 85% or so of the hospital's costs and then that's used as an explanation for why private prices paid by private insurers are so high and because I could pull together some materials from the American Hospital Association that embody that view but typically they're coming from the hospitals is that right? Yes, I think that's fair to say I think we're on are we on international rate differences? Yes So one way to get a sense of whether Medicare and Medicaid are underpaying hospitals in the U.S. is to look outside the U.S. and try to compare for a similar service how much does Medicare pay here in the U.S. how much do hospitals get paid in other countries and then what are private insurers paying here in the U.S. and this international rate difference this is a screenshot from a testimony that Jeff Stenflin from the Medicare Payment Advisory Commission gave where he looked at seven countries in the OECD and they're listed at the bottom of Australia, France, Netherlands, New Zealand, Switzerland and the U.K. and he looked at how much hospitals are paid for providing a hip replacement in each of those seven countries then he looked at what Medicare pays for that service and then what commercial insurers or private health insurers in the U.S. pay for that service and the finding is that Medicare's payments to hospitals at least for the service is actually up to the international norm and then private health plans here in the U.S. are paying hospitals prices that are far, far above international norms and the interesting detail that Jeff Stenflin works through is the fact that Medicare pays more than hospitals get paid in other countries but it also costs hospitals more to provide a given service here in the United States than it does in most of those other countries and the link that Jeff Stenflin makes and that resonates with my meet on the evidence is that hospitals again because they're nonprofits and they're mission-driven organizations whatever revenues they can bring in they will turn around and spend and the fact that hospitals in the U.S. are getting relatively high payment rates I think contributes to higher wages paid to registered nurses and some of the other professionals that work in hospitals in the U.S. So this international comparison I think reinforces the view that Medicare payment rates overall are reasonable relative to the international norms but that it's really the private health insurance plans here in the U.S. that stand out as being unusual and let me go to the total hospital and physician appendectomy five this is from the International Federation of Health Plans and this is a different example of the service provided in a hospital setting and for the OECD countries that are included in this study they're getting paid between say $2,000 and $8,000 per service in the United States these prices are based on the private insurance so the average among the private insurance is $16,000 per appendectomy so if Medicare is paying half or a bit less than half private health plans are paying Medicare rate in the middle of the international distribution and it's really the private health insurance plans in the U.S. that stand out as being unusually high relative to these international norms so let me go to the next question number three do hospitals in Vermont operate efficiently Dr. Wade Dr. Wade, we have a question from Representative Yacoboni Thank you, you may have covered this I just wanted to clarify that and I know I shouldn't assume but when I look at the other countries that you're benchmarking I'm assuming they do not have employer-based health insurance and I am assuming that our hospitals do and if that assumption is accurate wouldn't you expect our costs to be higher by nature but do that factor? Because hospitals in the U.S. have to cover the health insurance premiums for their employees and yes and they're covered differently to broad-based taxes or some other factor to these other countries that you benchmark so consequently one might think our costs would be higher to begin with Right, that's an interesting question so yeah, I wouldn't have to think about it I mean I think the fact that health insurance for most folks who have sponsored by employers in the U.S. don't add to employer's compensation costs but at the same time employers aren't paying whatever taxes are being paid to cover national health insurance systems in the other country the employee benefits I think if wages and salaries or maybe half of hospitals costs employee benefits would be a piece on top of that but I don't think it's going to explain it due to one price difference with the other country on the question of whether hospitals in Vermont operate efficiently this is one where I've taken data from Medicare hospital cost reports and I pulled out a couple indicators of how much hospitals in Vermont their cost per service provided and the most ample depth of comparison of cost per service provided comes from the Medicare program where we can look at Medicare fee per service beneficiaries receiving inpatient hospital stays based on the cost reports we can measure cost per inpatient stay applying Medicare's case mix adjustment and in the U.S. as a whole those cost per inpatient stay have grown to close to $8,000 in 2017 Vermont is about 20% higher than that and Vermont is a state with overall cost of living somewhat higher than the national average but not necessarily 20% higher than the national average so the finding on cost per inpatient stay suggests that Vermont hospitals are a bit more have expenses that are a bit higher than the national average even beyond what you might expect based on the cost of living the next slide is on expenses per discharge equivalent a broader measure of hospitals cost in producing healthcare services the discharge equivalent is a measure of hospitals output that includes inpatient services and also outpatient services and the expenses that we're measuring here includes expenses for all types of patients not just Medicare not just inpatient but inpatient outpatient and looking at these trends it looks like hospitals in Vermont their expenses per unit of output are about 20% higher than the national average and they've been growing more or less in parallel but Vermont's expenses per unit of output are higher than the rest of the country the next slide is on administrative cost shares this is looking at a hospital cost report and seeing how much of their costs are clinical care nursing and pharmaceuticals and so on and how much is spent on administration overhead and Vermont is somewhat higher than the national average having an administrative cost share that's close to 30% whereas the U.S. that's been creeping up over time but it's more in the 25% range and then the last measure is occupancy and occupancies can give some indication of whether a state or an area is over-bedded Vermont actually has an occupancy rate that's fairly high higher than the national average it's not as if Vermont has a large number of traditional hospital beds that are going on to occupy so on the efficiency measures there's some indication that Vermont hospitals have costs that are higher than the national average and administrative costs that are higher than the national average so now I want to turn to a sub-question for which is really the motivation for this whole discussion which is would increase in Medicare prices lower private health insurance premiums and I want to draw on the evidence from the other sub-questions and try to tie it all together so first let me say that if the prices paid to hospitals by private health insurance plans in Vermont were reduced my sense is that that would clearly reduce premiums for the privately insured and I've seen arguments from folks in the hospital industry who say that there isn't really a direct link between hospital prices and premiums my sense is that that's really muddying the waters really clear direct link between hospital prices and private premiums and it's important to point out that hospitals account for 44% of private health insurance paid benefits and if private insurance pay lower prices that's going to reduce the paid benefits and that's going to lead to reduced health insurance premiums so yes if private hospital prices were reduced they're lower premiums but the key question is if private if Medicaid were to boost its payments to hospitals would that naturally directly lead to reduce private prices my sense is no private prices are mainly determined by negotiating leverage between hospitals and insurers and adding more Medicaid money to hospitals revenues would not lead by itself to a reduction in private prices unless there were an enforcement mechanism to actually make those increased Medicaid revenues lead to lower private prices my sense no I haven't done enough digging to confirm this but my sense from reading the materials have read is that the Green Mountain Care Board isn't regulating prices paid by private health insurers in a direct way or necessarily their revenues although there is clearly oversight and budget review going on my sense is that an increase in Medicaid revenues wouldn't necessarily lead directly to a reduction in regulated private prices or revenues from private insurers and in the absence of that of a robust enforcement mechanism I think that the market dynamics would not by themselves just lead to reduced private prices and reduced private health insurance premiums so so that lead to the Dr. White question before you move on Senator thank you then question one the answer is yes but it seems like yes with some qualifiers then it doesn't happen of its own accord that premiums would go down if you without some enforcement mechanism I'm just wondering what sort of look at these separately and yeah so I'm just I'm just trying to understand but are they two separate questions and responses or are they interrelated just one two follow one that sounds like maybe not giving an update on the reducing private hospital prices for reduced premiums uh huh in other words would that happen without an enforcement mechanism my test is yes and the I think for the privately insured most of the privately insured are in employer sponsored plans and most of the folks in employer sponsored plans are in self insured plans where the employer is actually directly paying claims and and then it's paying an administrative fee to an insurer just to process the claims and so for self insured employers if the prices they're paying for hospital services fall that will be directly to the employer having reduced paid claims for their of a plan but then it will go to right yeah okay go ahead we're good for uh small group employer sponsored insurance there are minimum loss ratios and there's a somewhat competitive health insurance market in the individual market there's um competition uh with those minimum loss ratios and the minimum loss ratios and competitive uh insurance will tend to lead to premiums falling if those insurers can pay hospitals lower prices so let me go to the the rest of the plan and then I'm looking forward to more questions so that in general hospitals revenues between their cost in hospitals can bring in more revenues that their cost will rise and if hospitals revenues are constrained hospitals will become will outbreak more efficiently as a result whether public insurance over paying private insurance um underpay or private insurance over pay I'm reading the evidence that private insurance here in the U.S. uh pay hospitals uh grown taxes and inflation and are higher than international on the uh efficiency metrics uh for hospitals and for uh someone mixed with higher cost with the national average it's also uh the state with somewhat higher cost and then the last big take away uh in my mind is that having medicaid uh funding uh or having medicaid revenues to hospital budget unless there's a clear direct uh fortune I can submit it's my read on the evidence that it would by itself lead to lower private prices over lower health insurance premiums for the private insurance and then the left side uh sources for some of the studies that were cited that way oh quick thank you for including that so Dr. White um our time is limited today so we have many other folks waiting to testify so I'm unless there's a real burning question for understanding um is everybody okay? thank you very much this was very important it was really helpful um thank you so hello Dr. Schulman yeah good morning oh good afternoon thank you for being here we're all confused but you are actually you are actually still the morning I do yeah you're lucky with the time change with the time change in California too yeah yeah still in Arizona I think in Indiana we're going to get out of this thing um that's another topic so Dr. Schulman thank you for being here you're here with a group of both House and Senate members for the health reform oversight committee we have your PowerPoint in front of us and we have about 45 minutes for your presentation and questions so I guess the first question I have for you is do you want folks to interrupt in the middle of your presentation with your questions? absolutely okay we have to take one so why don't you go right ahead and then we'll listen carefully ask what we need to yeah thank you we had a little pre-call the other day so I put these slides together just to make sure I covered all the points that people wanted me to cover you know so our phone call really started with this question about health care costs and why are health care costs so high and obviously this is a big pertinence in Vermont and a big issue nationally and so what I want to explain the first couple of slides here is that actually this is a pattern that's occurred in the health care market over the last 15-20 years in trying to explain some of the circumstances that have led to this so the first slide is some data from the University of Washington that was published about a year or two ago and this was incredibly important data so in the United States from 2000 to 2017 health care costs increased by 155% you know more than double and the question is why and where did that increase come from and Dilman's work from the University of Washington shows that about 50% of that increase was due to what he called service price and intensity and translating that to English the prices in health care and so that's the price the intensity piece is there's been this tremendous consolidation of health care where hospitals can acquire physician offices and then call them hospital outpatient clinic and actually I confirm with Dilman about this and that's that second component so 50% of this increase in cost are due to factors, deliberate strategic factors pursued by hospitals the other major trend in the or I should say the major trend in the health care market over time has been the idea of consolidation hospitals buying each other buying physician practices and these data from health affairs from Fulton showed that for about 90% of the markets in the United States they were highly concentrated for hospitals for specialist physicians 39% for primary care physicians and 57% for insurers 91% may have warranted concerns by either the Department of Justice or the Federal Trade Commission because of the concentration levels and the changes in market concentration since 2010 and I'll show you a little bit more about physician consolidation continued so to put this in all in English if this was a different market the Justice Department most likely would not have let the hospital consolidation have occurred if they had been for profit rather than not for profit we never would have seen this level of consolidation occurring I'll pick on my I moved from Duke to Stanford about a year ago I should say by the way a background I'm an internist health services researcher and health economist here at Stanford with appointments in the medical school and our clinical science research center and appointment in economics in the business school I moved here from Duke a year ago and most of North Carolina's health care market has been carved up into about five or six different mega health systems they own the hospitals in the geographic region and own many of the practices this dates this idea about hospital consolidation really dates to health care reform efforts in the early 1990s so the mantra that people pursued in 1993 if you remember way back when Hilary's task forces under Bill Clinton the idea was that doctors and health plans would work together to keep people out of hospitals and that hospitals were the most expensive part of the health care system and so the idea obviously we never passed that reform but hospitals realized that they were incredibly vulnerable to health insurers and began this acquisition strategy and consolidation strategy that's continued to this day to the point where in many many markets hospitals now dominate and dictate prices rather than competitively bid at all so provider consolidation has been shown to be associated with increased cost especially to commercial payers and the other story that I will tell is that consolidation and this market power story also leads to an increase in the cost of providing health care but we'll come back to that in a minute this is more recent data on physician consolidation so in 2010 the hospitals have been consolidating as I just showed you since the year 1990 and they had begun to buy physician practices but we began a series of policy changes in 2010 around the Affordable Care Act that actually led us to believe that hospitals and doctors working together could reduce the cost of health care the federal government pursued this through the ACO strategy as they adopted at Medicare and as part of that they relaxed some of the antitrust constraints on acquisition of physician practices the other data that we have is that some of these practices since they're small don't trigger separate antitrust reviews every time they occur and so here are the most recent data I could find on the consolidation of physician practices in the US so about 44% of the doctors in this country are now employed by hospitals compared to only 26% in 2012 before we began this movement and then the number of hospital on practices is around 80,000 compared to 36,000 so we've really seen a pretty significant shift in the structure of the health care market and obviously the next thing about this graph includes the northeast includes Vermont and so we've seen tremendous shifts in the northeast as well to hospitals owning physician practices excuse me the last column percent increase relates to the percent of consolidation no in this figure it just represents the increase between 2012 and 2018 of the number of practices that were or either doctors or practices that were purchased but I mean these are dramatic numbers in a short period of time on the next slide is our work looking at Medicare for All that we published earlier this year and we use data from the American Hospital Association to say what happens in the market in terms of reimbursement for physician for different types of payers public payers and private payers and you see this curve and again this is the American Hospital Association data and so what we see is that commercial payers are paying more than hospital costs back in 2000 before the recent wave of consolidation Medicare and Medicaid were actually paying pretty close to hospital costs but then over time that's kind of dipped down below hospital costs and right now they're in the 80 percentile range again according to the hospitals themselves and so there are a couple of stories that are really important in this figure and so the first is why is it that private payers pay more than hospital costs and so much more than hospital costs and to me a big piece of that the answer to that question is this consolidation story that I just went through so obviously we have any trust laws to prevent people from consolidating or raising prices capturing markets and raising prices in healthcare the adage is all healthcare is local and all of the local providers can be under one system now and the net effect of that is to raise prices I should say to have leverage to raise prices and that tends to occur in a couple of different ways one is that actually just dictating a higher fee schedule and then there's some evidence that actually where the hospitals have the most market power beyond fee schedules they dictate the requirement that payers pay a percentage of hospital charges and I'll come back to that in a little bit but either way they're getting higher payment rate and increasingly higher payment rates over time the other trend that's occurring is our population is aging and so more and more people I think it's 2,000 about 40% of the market was private and in the last couple of years it's now down to the lowest 30%, 33% Vermont, depending on the demographics might be somewhere around there might be a little bit lower so the payment rate is higher both because of the unit charges and also increasingly there's less and less commercial patients out there so the traditional story here you know the public programs are not keeping up with the cost of providing healthcare and this graph if you just look at 2015 data it would be easy to argue well that's the case they look Medicaid and Medicare below and as a result the hospital has to increase the price to commercial plans but if you look across the graph there's a very different story that I'd like to tell and there's some data out of California from Jamie Robinson to corroborate the story but basically where you have leverage over private health plans as a hospital that becomes incredibly attractive as a strategy and so what I'd like to do is attract more and more commercial patients because their contribution margin amount of money per patient increases and so over time as the hospitals had more market power they become more aggressive about attracting private patients and I don't know what Vermont what the hospital situation looks like but I do know what that translated to was an incredible building boom and you may you could see this when you walk around the country hospitals have been building like crazy building new facilities, new cancer centers all underlying all this is the hopes that the new facilities will attract more commercial pay patient to that particular institution and the result of that building boom is actually the cost of providing care has gotten more expensive and so over time this dynamic is not that the public payers are being less generous necessarily over time it's just a hospital strategy of pursuing the commercial pay patients has led them to increase their cost of providing care so Robinson's data out of California suggests that where you have competitive market hospitals still make money more money off commercial patients than public patients but they're actually able to break even on Medicare and it's only in the consolidated markets that they lose money on Medicare and so I would like to argue that the idea of the cost of health care and the difference between public and payers is a dynamic response to the market it's not a cross-section, it's not a static this is a policy that hospitals have been pursuing for over a decade now and we're just seeing the implications of it so right after I published this paper I got a call from an affiliated person here at Stanford who used to run Aetna who said I was wildly underestimating the differences between the public and the private payment and that the hospitals were charging much more for the commercial pay patients and again these data in this graph here that says payments this is data from the hospitals themselves so the next couple of slides come from the RAND Corporation that just released a nice report earlier this year looking at actual claims paid for commercial health plans and so if you look at the hospital services chart, you'll see relative prices of hospital systems including Vermont I'll show you in a couple other diagrams basically relative prices for hospital care compared to other states the state didn't come out of this let's just skip to the hospital inpatient service where we can see Vermont and relative prices for hospital inpatient care compared to Medicare payments for hospitals so Vermont the actual payments for all the 145% I showed they really run looks like they run from 150 to 250% of Medicare so for inpatient care Vermont's in range with a bunch of other states but much higher than what the hospitals were reporting as their commercial as the commercial rate on the hospital outpatient side hospital outpatient I have a question what's happening in Colorado what's happening in Colorado so the circle is kind of proportionate it's supposed to represent the proportion of patients going to that hospital so the big circle would be like Denver and the little circles would be like Colorado, Sprint or something like that this comes from Dr. Wade Dr. Waley's article and this whole report is available online but you know a lot of care is now moving outpatient and the story I told earlier is that when the hospital acquires the physician practice it now becomes a hospital outpatient clinic cancer care a lot of that's provided in hospital outpatient setting and so the next graphic is Vermont on the outpatient services and what you can see is higher even higher prices for outpatient services up to 400% of Medicare across the state so compared to the American hospital association data said it was 145% looks to be actually quite a bit higher for commercial payers in Vermont I don't want to open up a whole another discussion but were prescription drugs controlled for in any of this data this wouldn't be prescription drugs but what this would be would be outpatient outpatient position administered drugs like cancer chemotherapy okay and again this is just relative to you know a very high price drug Medicare would pay a very high price what happens is the hospital marks it up even more thank you so in our call the other day really what I wanted to discuss is this difference between the prices available to commercial markets in the private market and the public market and this idea that this has been this dynamic and over time a lot of it driven by the consolidation of hospital systems a lot of it driven by acquisition of physician practices by hospitals and so to me that's kind of the major motivating story to the request that you all have to understand how do your Medicare payments in the overall context I also think with other states you need to remember that the state employee health plan is actually a commercial plan so these inflated commercial prices are what you're seeing on the state employee health plan side and several states North Carolina the state treasurer was actually mandating a limit on fees on the inpatient outpatient side to be left I think it was going to be around 75% of Medicare rather than 400% of Medicare let me one of the things a couple of states can you repeat what you just said about the 175% in other words capping fees at a certain percentage of Medicare yeah so a couple of states are realizing that they're responsible for paying for Medicaid and they're also responsible for paying for the state employee health plan and why are they paying two different rates and so why would you Blue Cross and Blue Shield North Carolina is going to be paying these commercial rates but you have a much better price to Medicaid and so is there something you could do to say look we're running two different healthcare programs that makes no sense and we have dramatically different prices and so I think it was Montana that started this and then just saying the state employee health plan not going to be paying commercial rates anymore and put a cap on the rates they would pay and there's a fight in North Carolina about this the state treasurer came out and said they were going to cap a state employee health plan payment thank you let me see if there are any questions and I had three different where do we go from here three different ideas of things that you can consider to try and address the situation over time I know you're working on changing the payment structure in general but part of this the underlying lesion here I would argue is kind of this consolidation strategy on the part of hospitals and their behavior to continually to increase the cost of care Dr. Shulman we have a question for you I think you invited a question and forgive me I may be blurring the previous presentation we had with yours but as I look at the data in terms of what we're paying the hospitals with our public payers I'm inclined to think that if you have a significant cohort of patients Medicare while assume our heavy utilizers and consumers of health care that if you're underpaying them if you're paying them 90 plus or minus percent of the cost that one would expect the private payers the commercial payers to go out also keep in mind we're the most as you may know rapidly aging state in America older population so given that I'm I'm left to assume that it does have an impact underpayments to public by public payers has an impact on the commercial payers but from your presentation that's not so it's more result of this leveraging that you talk about the ability of the hospitals to leverage more from the commercial payers is that I want to make sure I'm understanding you correctly because it goes against what I've been raised to understand yeah no I appreciate that very much and I frankly I had the you know the first couple of times I saw the cost shift that we always had a cost shift slide many top health economics talk and the cost shift slide was always this you know public sector's underpaying so the private sector has to pay more to make it up and I think I think I'd like to argue actually you know there's no such thing the cost is not a fix amount cost is the strategy the result of a strategy and it's something managers build into a product GM builds cost into how they produce a car every product and service you have cost is built into it and the question is what signals you know are the hospital managers responding to as they build cost into care delivery and and I would argue the cost they're responding to is their ability to exercise this enormous pressure on commercial payers I talked a little bit about in the call the other day I've been doing a little bit of work in the emerging markets in India and now in Nepal just to see what happens in worlds where we don't have insurance where you know access is incredible incredibly important problem and in India there these amazing hospitals Arvindai hospital and Narayanan which are this one N8 hospital I call it Narayanan hospital that were designed to actually lower the cost of care to provide care to the poor the Debbie Shetty runs N8 hospital and his email tagline is separating access from affluence at his hospital bypass surgery cost about $1,800 a case for open heart surgery the cataract things that are doing it at Arvind we're about to do a study of trying to assess the cost but it's probably going to be around $30 a cataract compared to thousands here and obviously we can't we don't pay Indian labor rates but the amazing thing about these hospitals is their strategy is how do I reduce the cost of care not how do I increase it and so they built these hospitals as platforms to offer lower cost care because in a cash pay market if you can't reduce the cost of care access and so I would use that as a contrast and I do this in class a lot to the strategy most U.S. hospitals perceive in one of the low cost hospitals we looked at in India the capital cost for a bed all in was about $25,000 the capital cost all in for the second to last hospital they built at Duke was somewhere $4 million a bed so you know we we've taken the constraints off managers in terms of their pursuit or their ability to actually not be accountable for the cost because they can just raise the price to commercial insurers and that's what we've seen that's why I go back to a dealman article that 50% of the increase in health care since 1996 have been unit price increase and that's had this dramatic effect that reverberates throughout the market potential approaches I think yeah so I in our discussions I want I want to talk about three different ideas that you might want to consider the first is you know how do we change the strategy of these systems and is there any opportunity to do so especially since you know part of this is the University of Vermont health system I'm assuming second is there are other ways to reduce administrative costs we have this national debate right now about administrative costs and are there things that we could do at a state level that might be an interesting model to test this and finally we've had an idea of how to reduce market leverage how do I reduce this leverage over commercial pairs which could dramatically force a different strategy at the hospital level so the most basic idea is that pretty much every CEO of a hospital in this country has some kind of balanced scorecard and their performance bonuses and compensation are directly tied to this and what you can see is they generally have four buckets quality customer service work culture and finances and depending on the hospital each one of these buckets is weighed differently but in general we have a model where the hospital CEO's compensation is rewarded directly based on how much money they make the hospital University of Vermont I'm sure the health system has reserves they have endowments that the CEO and the board celebrate their financial performance every year and so can we do something to actually change it I was working a lot with Charlotte observer that was looking at Caroline's health care system that was on a pretty aggressive path to acquire practices and increase prices and I actually asked them to ask the board why they voted to increase the cost of their own health insurance because the board members are made up from the local community I would say most of the time in terms of these four buckets the board members mostly understand finance especially if they come from a banking background and obviously very few of the board members are going to be clinical people involved in the clinical quality process and so this idea you have a disconnect serving as a board member of a hospital to increase the profitability of the hospital at the expense of the accessibility of people in the community is just a strategy question so what can we do about that one would be to dictate what the compensation what factors can enter into compensation in the state the second would be the tax if your compensation is based on profitability of the hospital I'm going to tax that 120% and alternatively you know, set up think about how we set up the rights and obligations of not-for-profit systems in the state so that they instead of worrying about the hospital margins they worry about access and affordability and so I would say that this is an area that would be very interesting to pursue and you know I know there's a paper about hospital CEOs who are interested in patient satisfaction in this customer service beef but one of the academic papers they came out was the reason why they're interested is the hospital CEO and the best performing practices got an extra $50,000 bonus based on the metric and so if we change the metrics we will change behavior and so how to do that and how can we do that aggressively would be a very interesting question the second is administrative cost and so here's some work we did actually at Duke where we looked at the cost of submitting a bill and what we found for primary care physicians at Duke the cost of submitting a bill for a primary care visit was $20 and 49 cents which equated to about $100,000 for primary care doctor for a year we're doing some follow-up work right now outside the United States to try and understand administrative costs and it looks like administrative costs are going to be lower in every country we're looking at whether it's a single payer system or a private multi-payer system and so the solution is not just a single payer to reduce administrative costs but what it is, what is required is actually to decrease the complexity of the payment model, the payment mechanism and so actually since our call I had another call with policy makers here in California and they're desperate for new proposals and one of the things we talked about is can we actually simplify contracts in favor of contracts from the back end of healthcare so that we don't have such complexity in the system that it costs $20 to submit a bill and so I think there's a big opportunity that we've been talking about this since HIPAA was implemented in 1996 but I think everything is so tacked out, tangible in Vermont and you already had some waivers from CMS it could be a good place to begin to experiment with not necessarily a single payer system but a single contract or a limit set of contracts especially between health plans and providers and we're building a market model right now to try and understand how much of an impact this can have but I think simplifying contracts and simplifying the number of contracts that are circulating in the state would dramatically potentially reduce some of these costs pretty significantly so there's 14.5% for primary care visits about 2% when you use your credit card so to me that 12% is the opportunity here and then finally I want to talk about this market leverage strategy we talked a lot about the fact that consolidation has led to increased prices because hospitals have leverage over health plans and one of the questions I've asked was a bunch of the health lawyers around here he has why they have leverage and so one of the things that boils down to we think one of the things that boils down to is this idea of hospital charges so if I sent you all a bill for 45 minutes for consulting services today for our time together and I sent you a bill for $100,000 you all would laugh and I'd be able to hear the collapse all the way across the country even without the telephone but if I put on my white coat and send you a bill for $100,000 for now the network service all of a sudden I'm entitled to that money and that makes no sense and so we've looked at this and at the court state court level obviously hospitals for out of network services in general hospitals don't tell you what the cost is going to be before you receive services they don't negotiate a contract with you and this is to their advantage actually in other countries they do but the hospital will then bill you for out of network services and they bill you under a legal theory of implied contract you know so the court is supposed to determine the terms that the two parties negotiate directly and specifically for compensation the court is supposed to impute the market price for whatever the services and the problem in healthcare we don't have any prices anywhere and so nobody knows what the market price is and so some of the times the court the hospital is going to be well represented by a very expensive law firm and they're going to come in and say we can't figure out what the market price is but here's our charges and charges is kind of the list price of a car it's a number that the hospital makes up it's not in relationship to anything charges used to be two times hospital cost or three times hospital cost they give you as much as ten times hospital cost there's some relationship of hospital charges to Medicare outlier payments in general there's no economic constraints on there's not even a definition of what a charge is but some of the times the hospital say well we can't I should say whoever is the out of network person says well I don't know what the market price is but it can't be that it can't be the list price and it's up to the judge to decide who's right some of the times a lot of times they decide with the hospital and some of the times they decide with out of network patient the most place where this has been most abused and most publicized recently in the case of air ambulances where not only is this occurring we're almost all air ambulances are out of network so there's no contract and they could charge whatever they want for out of network services but the air ambulances that abuse the federal the airline deregulation act to actually get themselves certified as air carriers and exempt from state regulation so they can literally charge whatever they want but it's all predicated on them going to court and having the judge determine that the market price is charges on the hospital side in general these negotiations start with the health plan coming in saying well we need a good price for me this year and the hospital turns around and says well we don't like that price but here are our charges and so if you don't give us the price we want that's fine and when your patients come to us they'll be out of network and they'll be subject to full charges and so the hospital can use that as leverage to get a higher commercial payment rate if in fact charges we're not a real concept we move back to a different definition of market price move market price away from charges and hospitals would not have this leverage in terms of private negotiation and again for out of network care there are in North Carolina there were huge games where people were deciding to stay in network or out of network based on whichever pathway you've seen what's going on in Vermont with surprise bills that's all related to charges like second surgical assistants that say they're out of network or emergency room providers that are out of network and hit patients up for charges so we think there's an opportunity to actually define for the state for any what the market price is administratively this would require really a very simple fix which is appoint a special magistrate to the courts to determine the market price and that would undermine dramatically the impact of hospital charges on cost in the state Lamar Alexander's got a surprise bill was doing a markup of the surprise bill and came back to something similar to this but in terms of a fee schedule just pick a number 175% of Medicare 200% of Medicare which is another way of doing this but obviously with things going on Washington that may or may not see the light of day but I think to my knowledge no state has really tried to address charges directly and that would be a huge opportunity for you all to consider thank you we do have I think it's going to be our last question I'm looking at your power point and I'm thinking that you've reached the end of your presentation is that accurate yeah so we have Senator Kishel with a question we're a rural state and when you came from Carolinas they have lots of rural areas we talk about hospitals but we have great variation in hospitals we obviously have our teaching hospital but then rural parts of the state have a very different small hospital critical access and when you're talking about different policies are there do we have to be careful around our strategies so that one might make sense for a very large hospital might in fact have a detrimental impact in terms of access to care in more rural areas in the state in other words we have to be a little more I don't want to use the term surgical but discriminate in a positive way depending on the nature of the hospital and location and size yeah I mean I think through Vermont a lot of times it's really beautiful you went to school at Dartmouth I understand yeah Chris Kohler says hello okay great oh wow it's a very small world so I would say there's kind of two things one is the issues with rural hospitals actually have a lot to do with this consolidation strategy because the way that this makes sense for large hospitals is to take all the attractive surgical procedures out of the rural then we call it hub and spoke strategy to take the profitable services away from the local hospitals and bring them back to the to the large urban teaching hospital and this is happening in North Carolina too at some level this is a good thing from quality perspective because we'd rather you get your total joint replacement hospital does hundreds of them rather than a smaller number and it's been increasingly hard to attract specialist doctors to rural areas as medicine's gotten more complex so some of these trends that are happening on rural hospitals have our results of these strategies from the larger healthcare systems and so it's irrespective of payment but there's no question that some of these payment changes could hurt the critical access hospital you know if they're really working off charges to balance the books then that's a big problem so I think I'd probably want to drill down specifically at the specific hospitals and whether or not they have a relationship a lot of them are probably owned by Dartmouth or Vermont anyway so it's a decision that those managers are making whether or not that hospital stays open but I would say I think that's an issue no matter whether we change payment or not the strategies that the hospitals are pursuing and the way medicine's going is impacting those rural care. Thank you I think that's good thank you very much for bringing your expertise for the record welcome to join me because she has a unique historical perspective of negotiations for the labor and especially the DSR dollars and so I think it's important that we look back and talk about what happened at the time of the negotiations and even if you look back in minutes of three month care board meetings the dean of the three month care board now was quoted at the time of the vote on whether or not to enter into the agreement as one of the compelling reasons for the vote was the possibility of accessing the $200 billion and delivering system reform dollars and leveraging those federal dollars to try to help transform the lot from what many people saw as a broken system of care with a fee for service and so on so thank you is there any part of your power point your letter and your original letter we had it all so a lot of what your question seems to imply is why should green month care board come forward now and talk about delivering system reform dollars and Medicaid dollars and I just want to point out that this chart here shows 118 hospitals across the United States have closed since 2010 and what we're seeing in front kind of is a little bit simple as that as well we currently have a half dozen hospitals that have negative operating costs and other than the main parts of the country we don't have more profit hospitals we have hospitals competing in the same health service area for business some people have said that we have too many hospitals that we want but that's not the question that green month care board has maintained and you always ask yourself the question is if you design a system today you design it the way it is I think whenever you ask that question the answer is usually no one would design it the way it is and it's true in health care it's true in education it's true in just about everything so looking back over time this chart here shows the growth of the cost of health care in Vermont and you can see that 25 years ago we were between 11 and 12 percent of our state's gross domestic product was spent on health care and that was growing rapidly and you saw huge growth not only in the hospital side of the equation but also in insurance rate increases and there was a number of years where there was significant double digit rate growth so not in 2011 past and trying to begin to bend the cost nobody ever thought that it was going to decline but if we could bend the rate of growth then we were moving in the right direction we've gotten over 19 percent of our GDP was spent on health care and we were about 2.1 to 2.2 percent more expensive as a percentage of our state's economy than the rest of the country I want to interrupt you very briefly because we want to make sure that we get to your response to the questions that we set regarding the 13.1 million dollars and Janet just asked me and that's it it's in the packet in terms of the course on it's required so want to be sure everybody which is the genesis of what we thought we needed to meet because they were very significant policy and fiscal implications with the decisions that we had and I see people around the room who are obviously concerned that if we were to simply use all our available money to move to the hospitals then what does that mean for long-term care mental health, primary care and so that gets into potential decisions that we are going to make in the upcoming session absolutely and everything's like a bulletin slide and I know that one of the arguments has been that there have been a number of downstream investments that have been made that should over time lower the cost of care and if you look at the governor's response to the letter we talked about investments in agencies and things like that and if it was totally new dollars that might be a very positive net effect on the system but at the same time for example the dish payments were reduced from over $37 million to $22 million at the same time and the fiber tax has gone up so I want to interrupt you Chairman we appreciate everything you're saying but we would like to have some understanding of how it is that the board came to make the decision about investing additional $3.1 million which Senator Pitchell has alluded to does put some pressure on our tax so the board didn't come to a specific conclusion about any monetary amount what the letter was in fact asking for was trying to get more dollars into the system delivery system reform could be significantly more than we could figure that but I think 13.1 million would probably refer to $3.1 million this year is one year budget or are you talking about the 13.1 and 50 loader's letter that in response to your questions is the amount that they came to as far as what the investments have been today it's not we weren't totally clear we thought that there were two things one of which was we needed to the state needed to put more into the delivery system reform and then the other part was we needed to increase Medicaid reimbursement as a technique to reduce the cost shift and therefore reduce private pay premiums so there were two fiscal pieces and so what we're trying to figure out well if in fact more money was needed for delivery system reform what is that plan for what those reform what the elements would be what would be the estimated time frame for the different components to kick in what would be the money that would be attached and how does it complement what we're developing is what's already in place and how do we build on it not that we're going to overlay it it was like when we got the letter well somehow if we had given more it would have made a difference in terms of what we had to deliver system reform tell us what that delay actually meant in very concrete terms what we're struggling with in terms of funding and then we have to put it in the context so in our response to your questions if you look at the final attachment it's appendix one of the agreement that was from the waiver that was negotiated in 2016 correct and that gave you a whole lot regardless of what delivery system $1 could be invested in based on those years that occurred with Washington at the time I really want to jump in but he's answering the question what else would have been used this is from the state's waiver negotiations to what would be the ACO's plan of reforms that they would want to put in place what would the money be used for yes it was that so let me jump in so the constraints around what the ACO could use are included in that amendment because that is what the administration and the federal government would need to work together on in order to get approval for the delivery system reform investment so that list provides really the garden rails around it we are currently in the middle of the ACO budget process so as Kevin said we have not typically approved or disapproved the line item for delivery system reform investments what we would do is a programmatic review about their care model population health investments that they were interested in doing we would look at whether they were continuing old investments over the new investments and we would be then comparing that to the criteria in Act 115 which requires the ACO to invest in population health to look at the continuum of care all those sorts of things so I think the genesis of Sharon's letter was to indicate that given some situations that we've seen in our regulatory processes now would be a good time to think about how they use those delivery system reform investments in a more robust way the intent behind those investments were to provide one time start to allow for really a jump start on innovation at the provider level I think these states sense the blueprint for health have been moving forward in the delivery system reform using three payments payment reform is necessary but not sufficient in addition to payment reform you also need to invest in provider readiness payment reform alone is not necessarily enough given that the state has the critical access hospitals so our hospital system unlike most urban areas but not unlike many rural areas is largely a critical access hospital system and that system means that there are resource constraints of a hospital in terms of the staff and or the expertise to jump start that so I don't think that anybody on the board is trying to dictate either to the administration or to the legislature that certain things should be funded however but I think the kinds of things that we are currently seeing in the budget we can't really speak to the budget in too much detail because we're in the middle of a regulatory process and that would not be proper but I'm going to tell you what we've received for information is investments like in Des Moines County the dulcet program which invests in babies and parents through a program that racks around you probably those familiar with the dulcet program that's a new investment from last year that would be continued and spread throughout the state and is a good model I think that has promise again an evidence-based model we would need to see how it's working out in Vermont because it's had some time in practice I think another example is the shift to different kinds of payments for the care model so one of the interesting things that I think we've been starting to see in this model is a shift from the hospitals into primary care the designated agencies home health and other areas in Chittenden County the home health agency has been partnering with one care to do a long-term care pilot which would allow for Medicare recipients who would not normally be eligible for home health to receive back care and they've shown even in a short period of time the significant savings per patient because that basically keeps those folks out of hospital so there's a number of different examples and we've included some of those in our letter those areas that could be invested in however it is a contractual negotiation between the department of home health access with the ACO to determine what the agency believes is the right thing to fund and then they of course have to work out I think the pie now is really illustrated by the slide 6 which shows what we're seeing as a friend and I would say before this year we're not a positive friend because we really only have one year back to the data at this point we have two years of actual data and a projection for fiscal year 19 and that's in favor of this the hospitals that are using money and you can see that for the most part now they've been using money in their actuals in the fiscal year 17 and 18 and several of them are projected in 19, we'll get the actuals for 19 so I think the why now question is that we're starting to see that the combination of a number of different factors are starting to particularly the smaller hospitals other than the rat award in the scene of things is not the smallest and that is starting to have a trend of negative financial margins if you did a comparative analysis just based on what we heard earlier of public versus private payment and negotiated payments to some of the hospitals in red would we find that there are lower reimbursement rates from the private so if you turn to the next page I can talk about how it works for in Vermont for hospitals so in Vermont the pre-public care board approves a maximum charge for commercial payers that the hospital can negotiate the hospital can negotiate something less than that amount that the hospital cannot be paid more than the increase in charge now as your last speaker indicated when it's a critical access hospital inpatient and outpatient services are being paid on a percentage of charge so there is a relationship for critical access hospitals between percentage of charge and actual reimbursement so one of the things you can see in this chart is over the last three years and into next year the board has been setting a maximum charge percent increase for commercial charges so what we see in the hospital budget process is we look at inpatient revenue which is the amount of growth in revenue that the hospital would like to attain we look at their operating expenses so that would be their actual how much are they paying in salaries at the aggregate level and all the different hospital costs we look at the operating margin and then we take that NPR and we break it into reimbursement and utilization and on the reimbursement side we look at how much of the budget the hospital would like to receive from reimbursement we then look at their Medicare and Medicaid assumptions Medicare this past year was about an increase that was estimated Medicaid to most hospitals estimated that at zero and then you can see the math where they back into their commercial rate based on the assumptions in terms of how much of their reimbursement is going to come from public payers into their private payers now that's obviously impacted by payers next and we're on our payers next it's actually more than a third it's closer to 46% I think of public payers and then what we will do is we since we're usually looking to push down NPR that's the way for constraining revenue so your first speaker talked about the revenue constrained environment in Vermont and we can strain revenues through the hospital budget process by setting an NPR target and then also part of that is pushing down on the commercial charges because obviously we see those commercial charges back in the rate review process the following year so I think one thing that's important to recognize is that we have been pushing commercial charge increases below the rate of inflation since 2017 and we know also that Medicare and Medicaid are not necessarily keeping up with information so I think the hospitals have been in a resource constrained environment for the last few years the data that we show off from Dr. Gardner's point indicated that Medicare and Medicaid were keeping up with inflation and that's the national data I think you have to look at that compared to what I want to see is have a line for critical access hospitals because unlike most of the states we're all states that need to be embarrassed to but Boston doesn't have the critical access hospitals that we have medical centers competing in the market that's going to change the way that chart looks if you compare it to critical upstate that has largely critical access hospitals so in fact some of the metrics around the efficiencies I was not particularly surprised by that I think critical access hospitals are kind of designed to be inefficient because they're not you wouldn't put them there based on the population you put them there because they determine the geographically at that area who needs a hospital in order to basically drive times to the ER work for the population so you could look at you know different ways of designating it but at least today the way Medicare looks at it is the critical access hospitals status so I was trying to connect a similar question between some of what we've just heard about specific you know rate of increase where the line keeps going up up and this line goes down and this one goes different things so hospitals are just a percentage of your overall healthcare spending well this is for inpatient this is inpatient stay right and this is charges commercial charges across inpatient and outpatient and it's not for stay so is that we've also seen more of the largest cost drivers as we look at greatly using out-of-state hospital expenses it's snow birds it's you think actually Dartmouth but it's also Albany, it's Boston those that are outside of the controls that we as a regulatory body have and then some of the other cost drivers we wish we could go after so for example specialty drugs 7.9% you know it's a great if you're battling the diseases that they're meant to cure, they're very costly and that's if you take a look at the actual trend for in-state hospital costs that are part of the case we actually have that information from the rate review that we provide you with the time one of the things that we've been doing in our regulatory alignment work is to connect the rate review process more tightly with the hospital budget process and so we have our actuaries we look at the hospital budget decisions as well as the enforcement decisions so one of the areas in the hospital budget process that has changed in the last few years prior to the Board hospital budgets were not enforced so if a hospital exceeded their budget they exceeded their budget the Board has been largely enforcing hospital budgets by cutting commercial charges and I know those in the whole county will refer to their hospital about this last several generations because they were not happy when they exceeded their budget and they cut their charges I think that that is the way we have been trying to ensure that the hospital budget process acts like a virtual I think that as a virtual global budget is it your position that if hospital Medicaid rates increased you have the authority and tools to reduce private commercial rates as long as something else wasn't produced and as long as we got it I would want personally I can't speak for Kevin but I would want data from diva that indicated their estimates of the impact on the hospitals so for example this past year I learned that Medicaid had done a modest critical access hospital increase I emailed someone I know in diva and asked them if they could provide an impact by hospital and then I took that back and I compared it to the charge request I asked the hospital how much that would impact them and it was the hospitals that were already on the red so I didn't end up proposing a change but I would certainly propose a change if the hospital was an administrative but yes I would try to take this conversation and align it with the direction we're going with the ACO because we seem to be focusing on hospitals but in reality hospitals are part of that for enrollee payment that's being made and so we have made investments on primary care so and we have made investments certainly in mental health so much of what influences care is beyond hospitals so how do you see it's more hospital centric in other words part of me is like saying well once the ACO gets into place they're going to be negotiating they're going to be able to theoretically assuming that we let that process work or maybe you have to mandate it I'm not sure you would see redistribution of dollars and spending within that box of services that are covered so there is a great incentive on the part of the ACO to put money where they can preserve health and minimize their costs so I'm just wondering ACO can't work without the type of care coordination that you're describing between all the different players I mean you can't be successful for all the possibilities of health if you're not doing that care coordination with all the different players would that argue who's participating in the delivery system reform Medicare, Medicaid and hospitals well that's Medicaid so are there other pairs it's an all pair model so the hospitals have formed a disproportionate share of the costs of the preparation what I would say this isn't really one payment structure which those investments where money has gone in in addition within Medicaid would in fact go into that negotiated payment and then the ACO would be negotiating the reimbursement with hospitals and the other providers that are in those services that are included in that and I just want to does that change the discussion about being quite so hospital centered I guess that's my question it goes directly to some of the legislation that we passed more recently than 113 but certainly 113 has that context as well for our designated agencies and others to become more engaged and involved in a continuum of care but you don't have authority for the first time part of why we're focused on hospitals is because that's the part of the system that we see in a lot of depth but I think part of what we're seeing is we are seeing an ACO system and you have regulatory over that yes and we are seeing I think redistribution but what we're also seeing is that we're at a critical time where we're going to start to see hospitals pulling out of the model because they can't afford and I think that that's quite frankly short-sighted but because I think that delivery system reform is the way that we'll get hospitals through what are really national pressures around Medicare sequestration and those sorts of cuts that are causing a lot of financial distress but when we have hospital system in distress a voluntary provider model and a redistributive effect from hospitals to other providers we're kind of a sensitive spot right now which is I think part goes back to why we wanted to raise that kind of dynamic that's happening to those of you who actually have authority over the funding stream of delivery system reform investments so I think from what we see we've been seeing this a critical time coming we're just now getting trends it seemed appropriate to bring that to people's attention but I agree with you Senator Gitchell that we are starting to see that redistribution and I do think that that will change with dynamics Thank you I'm very aware of our time I think that was a good place to bring some culture Thank you Thank you Good I know that you start to hear about those bands and you were asking the question about research articles but in a variety of terms there are a whole bunch of different articles on what exists over a dozen Are they going from the hospital association Are they all done by the hospital It's not all of them The hospital association Thank you very much for the opportunity to come and talk with you to remain in questions that may exist after I submitted my letter I do understand that this is a tricky situation I think for all of us given the order of events that has to happen and that one here right now is for negotiating its contracts with payers it's still looking for final numbers from Medicare still looking to do we mount care board to certify the actual budget of both Medicaid and Medicare right now and at the same time asking us to build our budget which assumes some so thank you for welcoming me on the community to have that discussion with you today just for a little level set and I'm just going to let you ask me a bunch of questions and I'm here to answer them Is one care or want an accountable care organization under the case you know we are essentially the vehicle or the mechanism for which this change could be effectuated the provider delivery system I think if you've heard around the room today welcomes this opportunity because currently the fee for service system is not sustainable for hospitals it's not sustainable for our home health agencies for our designated health agencies and so we're really embracing this level of change that starts to reward the delivery system for those prevention efforts for keeping people well and I would say as a nurse of 26 years this is why I went into this work is to really make a difference in the health and welfare of the monitors and this is what this is all about as well as helping people to be able to still continue to have health insurance because it is a very valuable thing for people to be able to have I would say or at a critical juncture with all of our partners in that this is technically year two of the model so if you think about it year zero which they called it was 2017 and that was the opportunity for the provider community to come together and start to test what paper form would look like to really put into place the processes and procedures to deliver on some of the flexibilities that the waiver offers such as the school name waiver and the other benefit enhancements to make sure that we had a decent foundation to work from and also to test whether or not the provider delivery system would be able to work in this manner together and in 2017 that was for brave communities and providers from throughout the state that signed up to do this and in 2018 we moved to a system that Medicaid was our great partner to start with and then looking to partner with Medicare which is also a good partner but they're very far away from us and they have very different rules and it's harder to have discussions about the way that things need to operate and for the 2HP program we really need to move into more payers I think that was one of the questions that came up is we don't have the majority of self-insured business in Vermont that's a significant portion to get to the all-payer scale model we've been working with Bay Cross and Shield very diligently to be able to move to that better health and integration across the network to participants and we need to have partners like MVP who have decided to come to the table and have this conversation with us and also require some of the larger payers that perhaps have a more national position and have proprietary rules and regulations that may not they may not participate in such a model so those are the balances and challenges that we face up to this point the delivery system and I say the hospital is the main investor in this and this is not to say that Medicaid has significant investments in piloting and supporting this program but the hospital system has invested about $50 million to date and that's to provide support to primary care to provide funding including grant for health which would have otherwise sunset absent the ACO as the new supports and services at home mental health agencies and programs like Verizon not and they'll say so with that I'm going to and let you ask me maybe before you jump give us the phone can you talk a little bit about delivery system reform request that is in the budget and that can come up as our concern and you know I apologize sometimes when you answer our question is really not a question that was being asked so you don't answer it in the right manner so to get to a 13.1 million dollars what it is and what it is when we answer the question what we try to think about is what were we able to do differently as a delivery system because of this program so one of the things that we were able to do differently is every year when we contract with meditator people we look at what our overall budget should be and right now that's based on the store quality for service planning but we look at what our budget should be for the year the actuaries come in they certify that budget so I don't have to mention we're not our finance person so I'm going to do like those simple numbers right now so let's say our budget is 100 dollars for the lives and that includes all previous fee for service payments that will render for individuals that are going to be participating in the program what we did is we said okay it's more than 100 dollars but basically we don't want to invest some of our own money to pay for care coordination services because that's not something that's normally ready for a plane care coordination services aren't only so we said we want to take a portion of that money and say that we're going to support care coordination efforts because evidence has shown that better care coordination will actually reduce the overall cost of care so it feels like a safe bet to us so what we're going to do is the care coordination money we're going to flow out to the health agencies the designated health agencies and primary care to really come in with a patient to provide the care and services that they need so out of the 13.1 million dollars that we saw in there what that was was one care saying of our total projected budget we're going to invest $5.3 million at that money into care coordination services so kind of exchange instead of a future service so that doesn't require the state to give us $5.3 million that says that that is what we're going to use as a system out of our budget to invest in care coordination services so that's existing money it's existing money so we're not asking you for new money for that piece we are asking you for new money but not for the $5.3 so of the new money that we're looking for that we've been talking with Diva about are those activities that we really feel like will address some of the evaluation criteria of the L-Pair Model access, chronic care management suicide prevention mental health and substance use and so of that what we're saying is we would like to have $6 million and when I say $6 million it's like $50.50 so about $3 million in state match for new programs so those new programs would be things like being a longitudinal care project that the Home Health did in Chittenden County that really shows a little cost and quality effects and expanding that on a larger scale looking at things like embedding pharmacists in the primary care practices to do clinical and pharmacology management to support their chronic illness so that they will end up in the hospital again really looking at some of the mental health and working with a designated mental health agency we started a contract this year where we would embed care coordinators into emergency room clinics to be able to support people when they came into the emergency room we started small and we would like to grow that even larger and then there's a portion of that money roughly 1.8 which is 900 that's a fun existing things that the state has already supported so that's a primary rise from on so that's a primary prevention program that really looks to provide individual communities with some enterprise grant supports and services that focus on overall illness so think about small tests of change if you have some shoes available in your community you're more able to get out and correct the age and that means start overall better health if you're able to have mindfulness I love that when my daughter was 10 she came home and talked to me about mindfulness activities because I think they're so important and I learned that at a younger age extremely valuable so those types of small tests of change in that can be that allows the community to really help these people that they can be so those are some examples of funding that we would carry forward so all in all it's about 3.99 dollars in the state funding that we're looking for 3.9 a question and it gets into actually an honor program that some of the chronic career initiatives the results have been disappointed it comes up everybody says yeah that makes sense and so how they're executed seems to make a critical difference in terms of what you have for outcome in terms of health and in terms of cost or utilization so the models that you're selecting out of those models that are out there where a laggers was actually one of the authors of the article and it said the outcomes were somewhat mixed and disappointing so I'm just when you're talking about how you're making investments how do you ever come back and say gee that was mixed or that was disappointing I would add to that how do you make the decision that this is the program you want and afterwards and then how do you establish your benchmark and how do you gather the data and you execute it and are you and what input in terms of that how do you make the choice with things that are going on in Vermont elsewhere that seem to be a total disconnect with what you're doing when there's a major work being done in a certain area and you go off and want to invest in a particular pilot that doesn't connect with what so I'm going to take that information because that's an easy first example when you thought about environmental investment to begin we thought about chronic care management as an opportunity to really bring primary care and the community care system together to better support people where they're at and so the blueprint had started some foundational work primarily in the primary care medical offices it was not fully spread to the full care community so what we did was we worked with the blueprint for health we worked with the Medicaid offices we worked with our home health agencies we worked with our designated mental health agencies area agencies on aging and said we'd like to put together a team support model where all the parts of the system would be working together instead of in their separate silos to really support individuals with their parents what we call higher risk so I think about those being some of your most vulnerable providers that really require some multiple supports in order to stay healthy so we worked together with the delivery system who has the greatest expertise at this and said this is what we're thinking about let's talk to let's look at the evidence that the pathways that currently exist let's try to streamline them get everybody on a unified platform to be able to start working together towards this and then once we get that system in place I'd like to think that we're a learning health system and we're consistently adjusting and making changes as the delivery system sees that things aren't working so well so this is the first year and I'm happy to send these to the committee part of our testimony was really looking at that original of patients that were in the pilot in 2017 and how were they doing after having this appropriate almost public dose of care for nation activities in their community and we have seen significant reductions for both Medicare and Medicaid in their overall emergency room utilization and their overall total cost of care we're also looking at things like are they connected for those that are managed right in care manager are they connected with a primary care physician or nurse practitioner or a physician assistant are they appropriately connected and the answer is yes they are appropriately connected at rates up to 90 percent we'd like to see in the commercial business because we haven't worked as well with them some better engagement because we do see in the commercial sphere that those rates are significantly lower than what they are in some of our more mature programs which are Medicare and Medicaid this actually gets to the heart of transforming the system and so thinking about having established clinical protocols but aligning those with commercial figures becomes critical so I think unfortunately I'd rather go back at any time than that you can't you can to provide a tour or some overview I would offer that to the rest of the community we're very welcome to have people come in and walk through the budget or answer questions or just answer questions about one care in general I think it's worth noting when you say things like 95 percent of the people involved have but it is still tiny numbers of people so those percentages can be a little misleading well and I think that's part of the reason why we're here today is we really need to accelerate the change because I think you've heard that it's very difficult for the delivery system to operate so I would just say that a closure that don't ever tell the legislature that you want to accelerate change I know because we're sitting in a room we'll try to slow me down thank you thank you very much so sorry I think we have the agency of the services here the agency the agency is the secretary congratulations we have a label it's called white hair but that's what we're surrounded by but now no we haven't been asking people to introduce themselves for the record I'll start my name is Mike I'm the new secretary of human services of the administration I'm the secretary of human services for a week and I'll allow Ina and Sarah to introduce themselves my name is Ina Beck and I'm the director of healthcare reform and the agency of human services hi I'm Sarah Clark I'm the chief financial officer for the agency of human services Madam chair thank you very much I just I started out with the conversation this morning on this topic and in this way I was very familiar with the original 1115 below commitment waiver I negotiated that about 14 years ago I helped come up with the concept and negotiated that waiver but this waiver is different in some ways especially with the tasks and so I'm getting on to speed on this waiver I will ask Ina and Sarah to answer your specific questions in general just wanted to outline some of the aspects when you're talking about the caps under the 1115 below commitment waiver I was trying to bring it into just one sentence and basically what I was what I can say trying to bring that into one sentence there's currently very little room in the 1115 waiver with what we call the investment caps under the 1115 general below commitment waiver we are constrained by two caps overall growth of growth cap and an investment cap this morning I addressed the two caps but it is suffice to say that the overall cap is becoming a constraint but more importantly the investment cap is near or virtually at its cap limit now we hope to gain some relief with the waiver that we have applied for for SMI IMD I'll ask these two what that is it's a mental health waiver that allows us to drop some of the expenses down to the regular Medicaid program and free of some of the caps that is approximately 14 million and that would provide some relief for DSR investments we're currently looking at what one care has submitted for DSR investments with a hope of of helping in that regard but without that waiver the state is postponing but even with the waiver there are competing interests out there for that waiver cap space and we're not certain as of yet that we will actually get the waiver we're hoping and we're hopeful that we'll get the waiver but in essence I mean I brought it to one sentence we don't have a lot of caps I have one question with so much emphasis on population health that's partly why public health agencies were created with SIST you see and that gets back to my question about where we have investments already in place which we are should we be saying gee rather than department of public health we should put it through the ACO I mean some of these community based are you going to have parallel kind of population health agendas so I don't expect answers to that but so much of what we do is sort of without really looking are we getting the maximum utility and are we doing it in a complementary way and I remember going at this table referencing that value from rise from up and how that would fit a lot of the work that our department of health is doing so I'm only throwing it out is something that I personally see what we tend to do is overlay something else on top of when already exists rather than how do we put it together in a complementary way so I don't expect you when you're one week but don't forget before one example of when we're looking at the issue of children that's going to tie right back to child welfare so I mean there's so many connecting issues here that there's huge duplication of care management they'll find out and frankly that's what we're looking at now is the investments in the DSR I mean the advanced community care coordination the system analytics the rise of mental health looking at how this fits into an integrated system Did you want to turn it to Sarah to talk about the cap the investment cap the growth cap $14 million in how that might become available can you give us that insight Sure I can talk a little bit about the two different caps we're talking about so with our last wave of negotiation in 2016 there were significant changes to how the federal government treated the overall Medicaid spending cap what we refer to as budget neutrality and as a reminder the federal government requires for states that have the 1115 wave like Vermont does that it has to cost the federal government the same or less that it would cost them without the waiver so our ability to spend on things like investments including the liberal system reform is all predicated on the fact that our model actually cost the federal government less with the waiver so in our last negotiation the parameters surrounding our budget neutrality were made more clear to us it also became really clear that unlike our previous methodology behind budget neutrality we were actually getting closer to our overall Medicaid spending cap than we ever had before for a couple of different reasons one, previously, it was treated as a cumulative cap so it would aggregate over five years whereas now it's a single year calendar of your cap that we have to live with then so truth be told it is at the end of the five years where it would come to pass the Medicaid spending so it is something that we now from an overall spending perspective we now much more closely monitor I would say if we look at the three years calendar year 18 calendar year 19 and estimates for calendar year 20 we're within 8 to 11 percent of our overall Medicaid spending cap so in addition to the budget neutrality cap we also have a sub cap on investments which prior to our last negotiation we really managed more from a risk corridor perspective of best practices we only want to spend X percent on investments of our total Medicaid program with the new waiver CMS established firm calendar year caps on investments so for calendar year 19 for example the year that we're in right now about the end of December we have an annual cap of 138 million $500,000 that amount over the next two calendar years actually gets less so we're estimating for the year that's about to end in December we have about $300,000 of work left on our cap which when you talk about $300,000 $138.5 million that's extremely tight and so it is something that we are actively managing on a quarterly basis because that's when we file our federal recording with the federal government so we're doing this just to be clear delivery system reform money will have to come out of a sub cap or whatever the investment cap which has which has to a couple hundred thousand correct what? no so I need to clarify a little bit and I hope I don't confuse folks first so when we say delivery system reform investments it's a very specific type of Medicaid it's an investment Medicaid when folks reference the 209 million dollars that was really potential funding supports for the all payer model it was not certainly investment as a matter of fact of the 209 million only 27 million dollars was targeted for delivery system reform investments and so I think sometimes it's complicated and so I think sometimes it gets blended together and so what the ACO was asking us for is actions delivery system reform investments and that's the 3 million and I believe what they were referring to when they say 3 million is the state share whereas we typically that's from a state match perspective that is what we need to concern ourselves with but certainly as an agency of human services we're also focusing on the gross dollar because it's the gross dollar that impacts both of our caps can we get a little spreadsheet on that? yes it's that simple so it's not just to come up with a double screen so as we talk about the DSRs on the request this morning's presentation to the joint fiscal committee talked about the serious mental illness favor that we are in the process of applying for and as a matter of fact we need to receive this waiver so that we can transition $12 million of investment spending to program to allow us the room underneath our investment path to even be able to take on the delivery system reform investments that the ACO is requesting so it is a contingency I think we feel confident that as the secretary indicated that we will be able to negotiate for a January 2020 implementation but it's important for everyone to understand that that we need that waiver approved to be able to move forward with these investments so does this relate I know that in the waiver there's a year 3 behavioral health and substance use disorder claim that the Green Mountain Care Board puts together is this money going to be used to invest in whatever that plan happens to be based on what the legislature indicates or is that two I can take that question good the agreement that Vermont has with the federal government requires that Vermont submit a proposal for a future agreement to include mental health substance abuse and long-term services and supports in total cost of care target for growth so that's not related necessarily to what the accountable care organization provides in terms of services it's related to the state and the federal agreement and what the state is accountable for in terms of total care that's the year 30 so it's in the end of performance year 3 but it is definitely linked in with whatever the ACO does since that is where our all-payer lives with our hospitals and our commercial insurers that is the discussion we will have with stakeholders over the year that we have to prepare this report including how the ACO relates to that and the state's ability to live under a broader target if the state proposes that again it's a proposal we have to propose what's best for the state of Vermont and federal partners can choose to accept or reject our proposal and it's really a first launch into a negotiation of a next agreement if that's where the state wants to go so our choice is for care that folds into our existing labor it's what you're talking about in terms of long-term care and the support that's done are you talking about the next version of choices for care I'm talking about that be sort of subsumed into this no no the all-payer contract that we have is our agreement with Medicare that allows the state of Vermont to govern Medicare's participation in the all-payer model and that is separate from our 1115 waiver that I just moved those choices did I interrupt you I actually think I I have wrapped up what I have to say oh man some Medicaid expenditures can help to reduce Medicare expenditures we have one program under CAP it's an MTO cap or an operating cap that might help reduce hospital readmissions nursing home readmissions help reduce chronic care costs CAP program with interventions but the Medicare reduce spending do those and you're to the feds do we get the CAP money in those and if you imagine the future we're not advocating and I'm asking should the state consider trying to get under that 1115 waiver not just Medicaid can you speak to any of that I don't know if you were to that's a discussion I think I've got to sort of sit back and think what the policy implications of what you're what you're sort of thinking through are and right now I just don't have nothing from insurance to do that that's been a historical argument they call these up the money Medicare that's about it yeah me other questions thank you everyone gets to before we close shop I think construction we have you're right on this is typical of our city typical of there's a so senator is going to make sure that we get the three articles they're all breaking and if you would like to have the article that dr. white through his data or do you have sufficient and also what he says that it's not mine I always look at it I definitely want to read that I know it's not so I'm hoping that as a result of the discussion that we've had today I know that in my committee we're going to be very engaged in these issues and I'm hoping that the House and Senate can work together I know that the Senate is very committed to these issues this is to reflect finding this is going to be working extra we're really interested in health insurance and realising costs but all those good things they're not mine this thing is that our health care is very much embedded in our ACO and our all parent model that we all need to work as carefully and as situously as we can to build a successful reform effort and it takes everyone in this room working with us to do that I'm looking forward to it if anybody else wants to I'll be welcome you're stepping yeah I know I was on the stage thank you thank you you