Hospitals tell Health Care Committee AHEAD model and rapid price cuts risk rural services

Devon Green, vice president at the Vermont Association of Hospitals and Health Systems, told the Health Care Committee that Vermont hospitals support transformation but warned that the AHEAD federal model offered to replace the state—s all-payer approach leaves little room for states to design different payment structures.

Green said the state—s hospitals provide uniquely required services — including 24/7 emergency departments governed by the federal Emergency Medical Treatment and Labor Act (EMTALA) — and serve as critical partners in emergency management, supply-chain contingency planning and disaster response.

The association official told lawmakers that critical access hospitals, which federal rules limit to 25 beds and an average length of stay of no more than 96 hours, rely on cost-based Medicare reimbursement. "Critical access hospitals were designated specifically by the federal government to improve access to health care in rural communities," Green said. She noted Vermont has eight critical access hospitals and one Medicare-dependent hospital, Brattleboro Memorial Hospital.

Green cited state data posted by the Green Mountain Care Board showing Medicare reimbursed roughly 85 percent of hospitals— costs in 2023 — below the ideal of full cost coverage — and said Medicare participation is central to any meaningful hospital payment reform. "Medicare is a big portion of our reimbursement and who pays us. And so Medicare defines a lot of things," Green said. She told the committee it is difficult to implement a global-budget approach unless Medicare joins or accepts the state's model because hospitals cannot change practices for the large Medicare patient share otherwise.

The Vermont hospital association also raised concerns about reference-based pricing. Using recent Green Mountain Care Board budget data and assuming a reference-based level of 200 percent of Medicare, Green said hospitals would face substantial revenue impacts. She acknowledged hospitals are exploring reference-based and other options but cautioned the committee that abrupt, uniform cuts "at 200% too quickly, will have a negative impact on hospitals." Green and committee members discussed tailoring reference levels by service type to protect services policymakers want to preserve.

Green criticized a recommendation in a consultant report that rural hospitals with low obstetric volume should close birthing units, saying that the underlying study suggested quality improvement support rather than facility closures. "I fundamentally disagree with closing birthing and maternal services in rural communities just based on a number," she said, adding that Vermont ranks highly for maternal health nationally and that recommendations need more context.

On waivers and federal authority, Green noted the difference between Medicaid 1115 waivers and Medicare policy: "There are two different things. The AHEAD model is just like innovation. My waivers are Medicaid specific through CMS. They're just two different things," she said, emphasizing limited federal flexibility for state-specific Medicare arrangements.

Green urged more technical assistance and local planning before any major payment shifts. She described hospital-led transformation activities already underway — regional collaboratives to improve purchasing power, partnerships to keep patients closer to home after transfers, pilot primary-care alignment and investments in interoperability — but warned hospitals have limited margins and need time and detail to shift services without unintended closures.

Committee members asked for the underlying data and schedules Green used, and Green said the association used Green Mountain Care Board tables and hospitals— 2023 budget actuals to build impact estimates. She said hospital leaders welcome deeper consultation with the AHS-convened consultant and are prepared to participate in transformation work, but need more clarity on how the AHEAD model, Medicare participation and rate-setting would work before implementing major changes.

The discussion made clear that hospitals are both willing participants in transformation and deeply concerned about operational and financial consequences if federal and commercial payer changes are implemented quickly or uniformly.

Green concluded by summarizing hospitals— readiness to engage and their need for clearer federal guidance and technical support: "We are at the table to do that. But I just wanted to give further context about, just we are very much looking forward to digging into these recommendations and looking at other potential recommendations or things that we can do, to make sure that, again, there is further information, context, and not just a conclusion based on a number."