State Auditor Doug Hoffer

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Is the state’s all-payer healthcare pilot program saving Vermonters more money than it costs to operate? Not yet, according to an audit of its implementation costs released Monday by State Auditor of Accounts Douglas Hoffer.

The audit found that OneCare Vermont, the accountable care organization (ACO) which facilitates the all-payer model, missed its Medicaid financial targets between 2017 and 2019 by a combined $11.1 million. Put together with the $14.5 million the state paid for OneCare Vermont’s operating expenses over the same period, that’s a $25.6 million overall net loss in Medicaid financial performance, according to the audit.

The audit also found that the Department of Vermont Health Access (DVHA) is “the only health care ‘payer’ that financially supports OneCare’s operating costs, and that DHVA paid a steadily increasing percentage of those costs each year from 2017 (28 percent) through 2020 (78 percent).” It also reported that the Agency of Health Services is not presently considering requiring other insurers to pay an administrative fee to OneCare.

In total, the state has spent nearly $30 million to implement the ACO model since October of 2016, with 84 percent of that amount coming from DVHA, the audit said.

“Put simply, at this time the financial costs to run the model significantly exceed any Medicaid savings attributed to it. This report does not analyze why, it is simply a fact,” Hoffer said in a letter accompanying the audit.

As for whether the all-payer model is meeting its goals of improving healthcare: That’s not possible to know yet, Hoffer said, because data quantifying whether the system improved outcomes is not available.


But two of the state’s top health officials said the audit, by narrowly focusing on operating costs and initial return on investment, missed important pieces of a bigger picture: The overall gains made by moving away from fee for service medicine, the complexity of the task, and the reality of system start-up costs.

The overarching goal of all-payer, Agency of Human Services Secretary Mike Smith said in comments included in the report, is to transform the health care system to support high quality integrated care and more efficient use of the health care system.

“Although there is still much work to be accomplished in this area, it is fair to say that an assessment that does not highlight the complexity of the change ... nor acknowledge realistic timeframes for measurable results, may leave a reader without a clear picture of performance,” Smith said.

The audit also found that the Department of Vermont Health Access provided millions of dollars in funding for OneCare’s operating expenses without knowing whether the funding was used for its intended purposes.

“[The Department of Vermont Health Access] was unable to provide us with financial detail as to how the ACO spent the vast majority of the [information technology] payments because DVHA never required OneCare to provide such information,” the audit said.

Asked if there’s any indication that OneCare misspent DVHA’s funds, Hoffer said “No, but we are likely to ask DVHA to ask One Care for documentation.”

“Every Vermonter knows that health care costs are too high, and that they are growing too quickly,” Hoffer said in a press release announcing the audit. “But even the best initiatives are only as good as their implementation. It must save Vermonters money and make them healthier.”

He also said the audit is not mean as criticism of the all-payer model, or the wisdom of moving away from fee-for-service reimbursement in favor of value-based payments.

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“A policymaker or state official can be completely invested in and supportive of the all-payer model and conclude, based upon the facts presented in this audit and elsewhere, that the implementation of the model, as currently delivered, needs improving,” Hoffer said.


In comments from state officials included in the audit, Smith and Kevin Mullin, the chair of the Green Mountain Care Board, took issue with aspects of the audit.

Mullin said any evaluation of all-payer must consider it ‘holistically” and include its impact on health care spending, quality and patient outcomes, rather than a “simplistic” return on investment analysis.

“In addition, analysis of the model’s financial performance should not be limited to the ACO’s ability to achieve savings relative to its operational costs,” Mullin said. “It should include an assessment of the value generated as a result of investments in population health and improved care integration, as well as economies of scale.”

Smith said the audit “takes a more narrow approach” to understanding the ACO by limiting its analysis to operational costs, and noted that evaluations of similar programs in other state don’t focus on such costs.

“It should be expected that proportionally more funding for health information technology and population health would be expended up front,” Smith said of spending to date. “Therefore, any conclusions from an evaluation of all-payer model implementation costs at this time are premature, both because the first period of performance is not yet complete and distribution of investment funds was intentionally concentrated in the earliest years.”

Vermont embraced the all-payer model when then-Gov. Peter Shumlin abandoned plans for a single-payer system, saying the state could not afford that. Instead, the state, working with the federal Centers for Medicare and Medicaid Services, developed all-payer as a five-year pilot project.

It’s intended to reward OneCare Vermont and its member providers for efficiently delivering high-quality services and maintaining patients’ health and wellness, moving away from the traditional fee for service model. OneCare then provides its members predictable prospective payments — rather than fee for service reimbursements — in return for providers working efficiently within a budget to provide high-quality care.

But OneCare Vermont has not succeeded in meeting its federally mandated enrollment targets, earning a warning from federal regulators that it missed its targets in 2018 and 2019. The state has attempted to address that problem, adding more than 13,000 state employees insured by Blue Cross-Blue Shield of Vermont to the OneCare program in February.

The addition of state employees is among steps being taken by the state Agency of Human Services to boost participation in OneCare Vermont, as the state strives to meet patient participation requirements.

In comments included in the report, Smith said “[accountable care organization] operating costs – particularly in early years – should not be a leading factor in determining whether the State should enter into a subsequent All-Payer agreement.”

In reply to Smith, the audit says that position incorrectly assumes opposition to another all-payer agreement, and that OneCare Vermont is the only option for moving forward.

The statement “perfectly illustrates, though, the conundrum facing Vermont policymakers and citizens,” the audit says. “If now is too soon, then when exactly are Vermonters entitled to call the question on whether their money-saving investments are actually going to save them money?”

Greg Sukiennik covers Vermont government and politics for Vermont News & Media. Reach him at gsukiennik@reformer.com.

Greg Sukiennik has worked at all three Vermont News & Media newspapers and was their managing editor from 2017-19. He previously worked for ESPN.com, for the AP in Boston, and at The Berkshire Eagle in Pittsfield, Mass.