“Health care delivery is going to change,” said CEO Tom Dee. “Health care spending is rising, and the average family can’t afford this anymore.” He presented charts showing the rise in health care spending, from less than $10,000 per year in 2002 for a family to almost $20,000 today, with a projected cost of more than $41,000 in 2021.
Dee said that changes were coming, many of which have been mandated by the federal Affordable Care Act, commonly known as Obamacare. The act calls for five key changes in health care, with most beginning in 2014. Those changes include reducing spending and improving quality; creating new financial incentives for health care providers; encouraging the creation of medical homes; expanding the use of electronic records; establishing health insurance exchanges; and reducing payments to health care providers.
Dee noted that the final component, reducing payments to health care providers, will directly impact the health care system’s bottom line. What “reducing payments” means is lowering Medicare payments for the same services.
“We’re losing money on Medicare patients now,” said Dee. “Our average margin is a negative 7% per Medicare patient, but 65% of our business is Medicare dependent.” Dee noted that there are only two hospital systems in Vermont that are 65% or more top-heavy with Medicare patients, SVMC and Brattleboro Memorial Hospital.
“Bennington County is the second oldest county, population-wise, in the state of Vermont,” Dee said. “We have a unique challenge.” That challenge will be to serve an aging population while still maintaining a revenue stream to pay for staff and services.
The other driver of change, at least in Vermont, is mandates created by the Green Mountain Care Board. That group is a five-member panel created be the Legislature in 2011 and appointed by Gov. Peter Shumlin. It is charged with overseeing change to health insurance and health-care delivery in the state.
One change already instituted in Vermont, on the recommendation of the care board, is that hospital revenue growth in the state be capped at 3% per year. While on the surface it seems like a way to hold down health care costs, Dee said it creates tremendous challenges for hospitals around the state.
“The revenue cap is an arbitrary way to hold down medical expenses in Vermont,” said Dee. “We can’t grow our revenue base by more than 3%, so it will be very challenging for us to start new services.” He added that nearby medical facilities in New York and Massachusetts are not operating under the same caps, and that they can offer services that SVMC will not be able to under the GMCB revenue constraints.
“We have to make tough decisions about what types of services we continue to offer and what services to stop offering.” Dee added that SVMC currently generates $150 million annually in revenue, and is the largest employer in Bennington County and seventh-largest employer in Vermont.
One decision already made at SVMC was to partner with Dartmouth-Hitchcock Medical Center, based in Hanover, NH. Dee noted that partnering with Dartmouth has given SVMC unprecedented access to medical data, top doctors and medical researchers, and an expanded medical provider network that reaches across the country and includes the internationally-known Minnesota-based Mayo Clinic.
Changes coming locally
While SVMC faces many changes on the short-term horizon, the Deerfield Valley health center may in fact benefit from much of that change.
The SVMC Deerfield Valley Campus, as it is formally called, has been a leader of modernization within the SVMC system. According to Dee and Dr. Peter Park, the local health center was the first facility of the SVMC system to be recognized as a “medical home” and the first to push for the use of electronic patient records.
According to Park, a medical home is basically taking a different approach to caring for patients, using a team-based model that includes a doctor, nurse, dietician, and a behavioral health therapist.
One of the reasons for the move to a medical home service model, according to Dee and Park, is to move away from fee-based health care.
“Fee for service is driving patients away from private doctors,” said Park. Insurance providers and Medicare are looking to reduce payments for those services. “The fee-for-service model is based on doing things,” added Dee. “It’s driving the crises in medical costs.” Park said that the medical home model is based more on maintaining good patient health and preventing expensive trips to the hospital for surgery and care, if possible.
When asked if prevention of hospital care would lead to rationing of medical services, Park replied that wasn’t the goal and didn’t foresee that happening. He also noted that prevention might mean the use of more alternative medical practices, including chiropractic and acupuncture treatments, before recommending surgery or other invasive procedures.
“We have a responsibility to take care of ourselves,” said audience member Mark Wallace, supporting Park’s concept of prevention. “I don’t think as a country we do that very well.”
Another factor that will drive change in the local system is a move toward more local office- and home-based delivery of health care services. That will mean the Deerfield Valley health center will need to expand to offer more services.
“In the future,” said Dee, “there will be less care at the hospital and more care at offices and homes.”
Park noted that SVMC has been looking for a new site to move the health center into, saying its current location is too small to handle the volume of patients it now receives, and its layout isn’t functional. “It’s tired,” Park said.
One option may be moving the health center to the current Twin Valley High School building, once the school relocates to Whitingham. Both Dee and Park said the size of the school and its central location were positives. There may also be grant money available to help facilitate the move.
Regardless of where the health center ultimately is housed, there is no doubt Vermonters locally and across the state will see significant changes in health care during the next few years.
“Under the current paradigm, it’s not a pretty picture,” said Park. “We have to change.”