DVHA outlines Medicaid path toward hospital global budgets as OneCare winds down

Alicia Cooper, director of Managed Care Operations at the Department of Vermont Health Access, told the House Committee on Health Care that DVHA has implemented fixed prospective payments for hospitals through its Vermont Medicaid Next Generation ACO program and began a complementary Global Payment Program pilot in 2024. "We began our thinking about hospital global budget methodologies in tandem with the state's negotiations for the AHEAD model," Cooper said, noting the department is developing a Medicaid hospital global budget methodology to align with Medicare requirements for hospital global budgets.

Cooper said the department views hospital global budgets as an evolution of the fixed-payment approach that will preserve revenue predictability for hospitals, continue incentives for value and population health, and offer budget predictability for Medicaid. "Hospital global budgets represent an evolution of fixed payments for hospitals from where we have been to date with our ACO program," she said.

She told lawmakers that a small number of hospitals — "I believe 4 or 5" — are participating in the Global Payment Program pilot and that, for participating hospitals, DVHA and OneCare are delivering fixed payments that cover the vast majority of Medicaid revenue for those hospitals. For those hospitals, Cooper said, fee-for-service payments largely cease for included services and fixed payments are intended to cover total cost of care aside from specific exclusions (for example, retail pharmacy services remain on fee-for-service in many cases because they are not included in the department's total cost definition).

Committee members asked how the global payments are calculated and how outlier high-cost cases are handled. Cooper said the fixed payments derive from historic expenditure analysis and the Medicaid program's rate-setting work with OneCare: DVHA estimates projected spending for an attributed population and issues fixed monthly payments to the ACO, which then distributes funds to participating hospitals and providers under its contractual arrangements. Cooper said the current ACO framework includes mechanisms to shield participants from exceptionally high-cost individuals by using thresholds and protections baked into historical experience; hospital global budget methodologies include different adjustment approaches to reflect population risk and other factors.

DVHA staff disclosed that they have requested $250,000 over two years to support development of Medicaid hospital global budgets and alternative payment models; Cooper said DVHA plans to implement a Medicaid hospital global budget in January 2026 and intends to align Medicaid methodology with commercial hospital global budgets proposed in S.126 where feasible. "DIVA intends to implement a Medicaid hospital global budget in January 26, aligning both the requirements of the AHEAD model and the commercial hospital global budgets proposed in this legislation," Cooper said.

No formal committee vote was held. Committee members asked for more detail on the number of participating hospitals, the treatment of outlier cases, and whether appropriations are needed for work DVHA is already conducting; Cooper said DVHA will provide follow-up documentation, and the agency will coordinate with AHS on budgetary components and fiscal notes.

Why this matters: As OneCare winds down and the ACO model changes, DVHA is planning to preserve certain fixed-payment functions and to expand a hospital global budget approach for Medicaid. That shift could affect how Medicaid pays hospitals, the predictability of hospital revenue, and state budget forecasting.

Ending: DVHA agreed to provide additional written materials and to confer with AHS and legislative fiscal staff to clarify how the requested $250,000 will be used and which hospitals are currently participating in the pilot.