Porter blazes new trail in health care payment reform: Gets lump sum for Medicaid expenses

Editor’s note: This story was updated after its original posting by changing the wording from “does not require any increase in fees and rates” to “does not require any increase in prices.” Hospital officials fine tuned our understanding of hospital jargon by informing us that “rates and fees” does not mean the same thing as “prices” in the vocabulary of hospital budgeting.
MIDDLEBURY — Porter Medical Center is proposing a fiscal year 2018 budget that falls well under the state’s spending parameters and does not require any increases in prices.
Perhaps most importantly, the budget places Addison County’s hospital at the forefront of a national movement toward payment reform in health care by making a major shift in the way PMC accounts for Medicaid expenses.
In this budget, the government makes a lump sum payment to cover Medicaid costs for a set number of patients rather than reimbursing the hospital for costs based on procedures.
Since February, Porter has been piloting this “next generation” payment model for its Medicaid patients. The Middlebury-based medical center is believed to be the only critical access hospital in the country to have volunteered for this new payment model, according to Porter spokesman Ron Hallman.
Under this model PMC has received around $4 million in Medicaid funds to pay the medical costs of around 2,600 at-risk, Addison County patients who are enrolled in that federally subsidized health insurance program.
The $4 million allotment is intended to cover expenses for the Medicaid pool of patients through this December.
This new pilot program epitomizes the current health care payment reform effort that is being advanced by the state of Vermont and through the federal Affordable Care Act. At its center is the notion of giving hospitals incentives to take preventative measures to keep their population base healthy, as opposed to the current system that rewards medical institutions for performing often-costly medical procedures.
Porter Chief Financial Officer Jennifer Bertrand explained how the new system encourages PMC to be as efficient as possible in its use of Medicaid funds. If its outlay for Medicaid patient care exceeds the allotted $4 million, it will have to make up that shortfall within its operating budget. But if it ends the year with some surplus, it will be able to plow that into PMC improvements.
“We’re taking some risk here,” Porter Hospital President Dr. Fred Kniffin acknowledged of the pilot project. “When you get paid by the visit, it’s different mechanics than when you get a big lump sum.”
And PMC is going all-in on payment reform. Come Jan. 1, it will transition to a similar “lump sum” budget allowance for its Medicare patients, according to Kniffin.
“If we take good care of (the patients) and keep them out of the high-cost areas — the operating room, the MRI machine, the ER and the intensive care unit — we get to keep some of that money,” Kniffin said. “If we come up short … then it’s on us. We take that risk. We just don’t get paid.”
Officials explained the risk is worth the reward, and that PMC will be ahead of the curve in moving from what they said is an unsustainable fee-for-service model to a payment plan predicated on keeping people healthy.
“We have a great community here, and people want to be healthy,” Kniffin said. “We think we are going to succeed.”
This will require Porter to dispense more preventative care to its patients. That means regularly networking with Medicaid recipients to encourage them to visit their physician, connect them with counseling, find them housing or take other steps on behalf of their wellbeing in order to pre-empt more expensive medical procedures and hospital stays.
“The goal for us is to ensure that we are providing primary care levels of services to those individuals in an effort to keep them out of high-cost areas,” Bertrand said.
Porter’s participation in the Medicaid payment pilot project is being done with the help of University of Vermont Health Network (UVMHN) and OneCare Vermont, a statewide Accountable Care Organization of which PMC is a member.
Officials believe this kind of payment reform will ultimately affect all health consumers, and not just those on Medicaid and Medicare. But it makes sense to begin the transition with people who are among the biggest health care consumers, noted Hallman.
“Society has determined that a relatively small percentage of people are major drivers of the health care system — 16 percent of the population, due to chronic conditions,” Hallman said. “We all accept that as a factual given. So what the government is saying to us is, ‘You know who the people are who are consuming all of these services, if you put into place preventative measures … and you can actively manage those people successfully, then that’s how you end up being successful. It’s a way of the government encouraging providers to pay more attention to the people (consuming the most services).”
Bertrand said Porter is “doing OK” through the first six months of the pilot Medicaid payment program. The new system has also provided more predictability in Medicaid program financing than under the prevailing system, she added.
The Medicaid payments system is just one part of the broader budget that PMC is submitting to the Green Mountain Care Board for approval.
Porter Hospital is requesting an overall 3.4-percent increase in net patient revenue compared to this year, but the organization plans to realize that income from some new programs, including its ExpressCare center that serves patients needing quick attention — but not an Emergency Department visit. The hospital has also received a nice financial bump from its infusion center and expects good growth in outpatient services including imaging, physical therapy and cardiology.
“This is the first time I can recall that we are not raising prices for anything,” Kniffin said during an interview on Monday.
The PMC budget includes the hospital, Helen Porter Healthcare & Rehabilitation, and a dozen physician practices that fall under the Porter umbrella. Porter’s fiscal year 2018 spending plan must still be vetted and approved by the Green Mountain Care Board and meet financial targets prescribed by the UVMHN, of which PMC recently became an affiliate.
University of Vermont Health Network charged PMC with preparing a budget that maintained a 0.6-percent operating margin. Porter officials have drafted a spending plan that officials believe will maintain a 1.2-percent margin — twice the wiggle room UVMHN had prescribed.
The budget also recommends the hiring of seven new registered nurses in an effort to reverse the hospital’s recent trend of having to bring in more costly traveling nurses to fill shifts. PMC is currently negotiating a new contract with the local nurses’ union.
Kniffin is hoping the PMC budget gets a smooth endorsement from the Green Mountain Care Board. It’s a budget that is launching PMC into a new era, he believes.
“Our mission forever and ever has always been to ‘take care of the sick and injured,’” Kniffin said. “Now, you’ve seen in the last couple of years that the mission has changed to ‘improving the health of our community.’ It’s a much broader mission. If our mission was simply to care for the sick and injured, we would put together a budget that takes care of the sick and injured. That would involve a lot of machines and fancy doctors — that’s one way.
“But when you start looking at ‘improving the health of the community,’ you need to focus on things like primary care, suboxone (availability for opioid addiction), ExpressCare — services that fit in a community hospital. Yes, we are there for you when you are sick and injured, but we’re also trying to keep you healthy. It’s a different focus.”
Reporter John Flowers is at [email protected].

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