VT hospitals eye "global budget" payment model

At least one Vermont hospital may transition to a drastically different payment system by the end of the year, according to VT Digger.

The Green Mountain Care Board plans to test a "global budget" payment model after Rutland Regional Medical Center asked to transition to the plan, and other hospitals may consider the plan as well, according to the article. Under global budgets, regulators determine set payments for hospitals to care for the patients they serve, rather than the hospital billing each individual patient. Since 2012, the board has set budgets for hospitals, signing off on a maximum figure based on hospitals' total revenue.

Under the global budget model, hospitals lose money if they go over budget, because the global budget represents the total payments to a hospital from all payers over a given period (usually the previous year), according to the article. The budget derives from a given hospital's historical revenues, adjusted for inflation and changes in patient population demographic. The model means "everything that was revenue for hospitals becomes a cost they need to manage," Richard Slusky, the board's director of payment reform, told VT Digger.

Global budgets help quality of care, Rutland Chief Executive Officer Tom Huebner said, because they "align incentives in a way that drives unnecessary utilization out of the healthcare delivery system, but also allows the healthcare delivery system to survive." Huebner acknowledged that the model needs testing before the state considers implementing it on a larger scale. 

Southwestern Vermont Medical Center in Bennington has also expressed interest in the model, according to the article, but unlike Rutland, Southwestern has a large percentage of out-of-state patients and therefore, "the question is really whether it will work in our region," said Southwestern spokesman Kevin Richardson.

European nations such as Germany have operated successfully under the global budget model, FierceHealthFinance previously reported.

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- here's the article