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Panel hears options on global budgets and reference-based pricing amid warnings on hospital sustainability
Summary
Presenters reviewed payment-reform approaches — global budgets, rate setting and reference-based pricing — and cited analyses suggesting Vermont's hospitals face elevated risk of closure without changes to financing and commercial prices.
Legislators and presenters discussed several payment-reform options for Vermont hospitals, including AHEAD-style global budgets, rate setting and reference-based pricing, and flagged hospital sustainability concerns highlighted in recent analyses.
A presenter reviewed distinctions between revenue caps and care restrictions, noting that a global budget functions as a cap on revenue and that how the cap is calculated differs from other mechanisms. The presenter emphasized aligning incentives so executives pursue state goals and cautioned that payment reforms alone will not immediately fix system-wide inefficiencies.
The session referenced an Oliver Wyman review (the Oliver Wyman team is cited in testimony) and a Becker's article summarizing a national study of hospitals at risk of closure; presenters said Vermont ranked among the highest for hospitals at immediate risk of closing in the next two to three years. The presenters warned those risks could increase if the Blue Cross situation persists or if national reimbursement policies change.
Reference-based pricing was discussed as a tool to lower commercial hospital prices. Presenters said some Vermont commercial prices are among the highest nationally and that referencing prices could free up commercial-payer dollars to direct toward primary care, long-term services or community providers such as federally qualified health centers. They also said reference pricing could shift revenue among hospitals — reducing income for some and potentially increasing it for others — and that such redistribution would present challenges for affected facilities.
On the policy toolbox, presenters said the Green Mountain Care Board already has statutory rate-setting authority but would need to build programs and resources for rate setting, global budgets or reference-pricing programs; none are "a light switch," they said. Presenters listed complementary strategies to lower revenue without reducing care, such as shifting avoidable emergency department visits to primary care and lowering expenses so commercial prices can fall.
Law and policy references during discussion included a statute identified in testimony as "09/1971" described as principles of health-care reform, and mentions of Act 167 and other transformation efforts. Presenters and stakeholders urged careful selection of reforms that match the state's specific problems and system capacity.
The board and stakeholders signaled further work is needed to align incentives, refine caps and design programs that include necessary analytics and operational capacity. Presenters said they will continue analysis and coordination with providers and payers before presenting legislative recommendations or program proposals.
No formal votes or motions took place during this portion of the hearing.
