Vermont finalizes payment model that rewards care quality

Vermont Gov. Peter Shumlin

Vermont Gov. Pete Shumlin, who has spearheaded Vermont's effort to move to an "all-payer" healthcare payment model. (Photo from

Vermont has finalized a new state-wide payment model aimed at improving health outcomes and care delivery in order to keep residents healthy and avoid the high costs associated with caring for sicker patients.

Earlier this month, Vermont Gov. Peter Shumlin reached a draft agreement with the Centers for Medicare & Medicaid Services (CMS) that would allow both public and commercial insurers throughout the state to pay providers based on quality and promote preventive services. On Wednesday, CMS announced its final approval of the initiative called the Vermont All-Payer Accountable Care Organization (ACO) Model, which would comprise nearly all payers and providers within the state, including Medicaid.

Vermont’s program is an offshoot of Maryland’s all-payer ACO model that has shifted the majority of hospital revenue within the state to an alternative payment model that rewards quality care. However, Vermont’s program expands the model beyond hospitals, which could “provide valuable insight for other state-driven all-payer payment and care delivery transformation efforts," according to CMS. 

“This model is historic in terms of its scope, aiming to include almost all providers and people throughout the state in an all-payer ACO model to drive improved quality, better care coordination, healthier people and smarter spending,” Patrick Conway, M.D., CMS principal deputy administrator and chief medical officer, said in the announcement.

CMS Acting Administrator Andy Slavitt also tweeted his support:

But state officials say it will be a gradual transformation. Robin Lunge, director of healthcare reform for Shumlin, told the Associated Press the state expects to reach 36 percent of care services by the second year, and ramp up to 70 percent by year six.

A report released earlier this week found that nearly 25 percent of healthcare payments in 2016 were made through alternative payment models that emphasized coordinated, quality care. The Department of Health and Human Services has said it already reached its 2016 goal to tie 30 percent of Medicare payments to alternative payment models.