Political Overview

As we end the second month of this legislative session, governance and Certificate of Need issues continue to dominate the agendas of both the House and Senate Health and Welfare committees. House Health and Welfare Chairman Thomas Koch, R-Barre Town, and Senate Chairman. James Leddy, D-Chittenden, are giving careful consideration to proposals from all interested parties and are encouraging their newly formed committees to learn the history and track record of past attempts at regulation before jumping into something new. The Senate committee will review VAHHS' legislation, S.63, introduced by Senators Cummings, Doyle and Scott. The House committee will likely introduce a revision of their original CON legislation, H.128, this week.

The two committees have heard and will continue to hear from a wide range of witnesses, including reform advocates, hospital CEOs and trustees, regulators and the new management team at Fletcher Allen Health Care. While the ultimate outcome remains unclear, modest changes to the Certificate of Need (CON) or hospital budget review laws may emerge from committee, but sweeping changes are unlikely.

On Medicare issues, the core political battle over health care this session will be about money. Faced with a declining rate of growth in state revenues, Governor James Douglas has proposed a Medicaid budget that will neither require new taxes nor eliminate eligibility for any current recipients. That leaves provider reimbursement as the only place to try to control the cost of the program. The Governor's long-term goal continues to be reduction of the cost shift to commercial insurers that occurs when government programs do not pay for the cost of care. In the short term, however, the cost shift likely will increase slightly in the FY 04 state budget as the least painful of several bad alternatives for controlling the cost of the Medicaid program. In the short term, at least, that is the message for hospitals contained in the FY 04 budget proposal. The FY 04 budget proposal will be reviewed during the next three months by the House and Senate Appropriations Committees.

Specific issues addressed this week by the General Assembly include:

S.17, Abuse of Vulnerable Adults
This week the Senate passed S.17, a bill that proposes to increase criminal penalties for abuse of vulnerable adults by "caregivers," including nursing homes and hospitals. VAHHS and other provider groups made significant progress on tightening up the language in this bill in the Senate. For example, the section of the bill that proposed to institute criminal penalties against a board of directors or a "high managerial agent" of a facility was removed and the "neglect" section was revised. The "Abuse by Restraint" section continues to be a problem, however. VAHHS will work on that section in the House. Text of the bill as it passed the Senate.

Senate Health & Welfare Committee
This week the Senate Health and Welfare Committee walked through S. 63, a certificate of need reform bill that VAHHS supports. However, Chairman Jim Leddy, D-Chittenden, believes the bill should more clearly address governance issues. The committee will begin taking testimony on this bill starting Thursday, February 27th.

Congressman Bernie Sanders, I-Vermont, and members of the task force he created to investigate the governance issues at Fletcher Allen Health Care (FAHC), testified before the committee this week. Sanders stated that FAHC must diversify its board of trustees to include health care consumers, non-physician hospital employees and elected officials, and must open its meetings to the public.

H.128, Certificate of Need (CON)/Hospital Budgets
The House Health and Welfare Committee had a lengthy discussion on Tuesday, Feb.18th, about what action they intend to take with respect to H.128, the certificate of need bill. The committee asked Maria Royle (the legislative council staff member) to draft a bill containing the following points:

1. The Public Oversight Commission (POC) makes the final decisions on the budget and CONs (possibly a three-member panel of the POC consisting of the chair and two members appointed by the chair). There was unanimous agreement that the decision should not just be made by the BISHCA Commissioner.
2. The need to develop a health resource management plan (like the one that existed prior to 1996), or other specific policy document to guide CON decisions. The committee wants the document to be developed either by the POC or another public body, after extensive public hearings and possibly submit the plan to the General Assembly for approval by an up or down vote.
3. At the last minute at the request of Rep. Anne Donahue, R-Northfield, the committee agreed to include a provision related to community report cards. However, the committee did not discuss what they wanted to include in this regard.

The committee ran out of time to discuss other issues so it is expected that only the three issues outlined above will be in the new draft of H.128. Chairman Tom Koch, R-Barre, said he hoped to have a draft bill containing these provisions "out for inspection" by Tuesday, February 25th, with markup and a vote by Friday, February 28th. This is a very ambitious schedule. It is important to note that the committee will likely add more provisions to the draft bill than those outlined above as they begin marking up the bill on Wednesday, Feb. 26th.

In other news, trustees John Nicholls and Dr. Peter Dale of Central Vermont Hospital (CVH) testified on Tuesday. Nicholls educated the committee on the governance structure at CVH, how someone becomes a trustee and trustees fiduciary responsibilities. The Board provides input on policies and the role of the hospital in the community, reviews quality and risk management issues, credentialing of medical staff and oversees the financial management of the hospital. Dale stated Vermont is recognized nationally for quality, access and cost of care. In order to have a health planning process work properly you need to have the expertise at the table collaborating and developing the plan.

Joseph Woodin, CEO at Gifford Medical Center, testified on Wednesday. Woodin stated that Gifford Medical Center is one of three hospitals in the state that has the designation of a critical access hospital. Woodin expressed his concerns regarding open meetings and failure of the state to recognize the difference between tertiary care centers and small community hospitals. Woodin stated that the current CON process works but that the planning process used in connection with the CON process needs improvement.

Trustees Patricia Burnham, Mark Clough, Laurel Stanley and Paul Sweeney from Northeastern Vermont Regional Hospital (NVRH), testified on Friday. Burnham gave an overview of NVRH's governance structure and its leadership team. Burnham distributed to the committee a trustee job description and a report of "Board Action and Issues Under Consideration" that is sent to all hospital incorporators, physicians and hospital employees quarterly. The hospital has quarterly incorporators meeting, which the CEO and trustee representatives attend, in order to get feedback on the issues outlined in the report. Stanley's testimony focused on the quality, credentialing and peer review, and report cards. Stanley reminded the committee that business owners are community members and it is the community members that make up the board of trustees.

On Friday afternoon the committee heard testimony from a group of Fletcher Allen Health Care registered nurses encouraging the committee to include whistleblower protections for health care workers in the bill.

Agency of Human Services Reorganization

Charlie Smith, Secretary of the Agency of Human Services (AHS), and Eileen Elliott, Deputy Secretary of AHS, testified this week before the House Government Operations Committee regarding their plans to reorganize the agency. Under the proposal, the existing seven departments within AHS would be merged into four. The new departments are the Department of Health, Aging and Disabilities, the Department of Corrections, the Department of Public Health and the Department of Families and Children. See the document diagramming this proposed structure: "AHS Proposed Reorganization Structure." Secretary Smith gave the committee draft language he'd like to see pass that authorizes him to reorganize the agency. That draft language is in the following document: "AHS Reorganization Draft." After various House committees review this language it will likely be placed in the FY 04 budget bill in the House.

FY 04 Medicaid Budget

Pat House, Commissioner of PATH, testified before the House Appropriations this week. House indicated that most of PATH's FY 04 budget is consumed by Medicaid. Two items that are placing significant pressure on the Medicaid budget are the reduction in the federal match rate from 62.57 to 61.61 percent and an increase in the caseload of 5 percent. House noted that these downward pressures on the budget would be offset by the tiered deductibles and other cuts that Governor Douglas proposed in his Medicaid reform package. House confirmed that the budget does not include an increase in provider reimbursement rates.

Nursing Home Inflation factor and Bed Tax Update

More specific details about the nursing home inflation factor and bed tax for the FY 04 budget were released this week by the Department of Aging and Disabilities. DAD is proposing:

• $222 per bed increase in the bed tax
• 3.8 percent inflation factor totaling, with the federal match, $3.1 million

State to Seek Proposals for 80 Bed Inpatient Facility for Treatment of Substance Abuse

This week Governor Douglas announced plans to seek proposals for private operation of an 80-bed inpatient facility to treat persons with drug addiction. With many Vermonters receiving treatment at out-of-state facilities, the Douglas Administration believes the new facility would offer care not currently offered in state, help contain costs and offer more effective treatment. The state currently offers these services through a variety of state entities such as the corrections department, social services, the Office of Vermont Health Access and the Office of Alcohol and Drug Abuse. Once the facility is fully operational, the Douglas Administration projects that the state would pay for 85 percent of the facility's charges, but no new state dollars would be needed than are currently being spent for this type of treatment. The successful bidder is expected to be selected by July 1, 2003. The Brattleboro Retreat has expressed an interest in bidding to operate this facility.

Multistate Pool With Michigan for Purchase of Pharmaceuticals for Medicaid Recipients

Governor Douglas announced an undertaking with the State of Michigan to pool the purchasing power of the two states to obtain better discounts or rebates for pharmaceuticals for their respective Medicaid programs. Both states will continue to have their own preferred drug lists, but will work through their third party administrator to obtain greater or supplemental rebates from pharmaceutical manufacturers. The Douglas Administration did not provide an estimate of savings, although it did indicate that the program would cover 139,000 Vermonters. The current cost to the state is $93 million for pharmaceuticals. Other states have expressed an interest in joining Vermont and Michigan.

Homeland Security Advisory Council Established

Governor Douglas signed his first Executive Order today forming the Homeland Security Advisory Council. The council will coordinate terrorism preparedness efforts statewide, including more participation by local governments and private organizations than under the state's Terrorism Task Force. Republican Lieutenant Governor Brian Dubie will chair the Council. Some of the other members of the Council include Jan Carney, Commissioner of Health, Martha Rainville, Vermont's Adjutant General, and Kerry Sleeper, Commissioner of Public Safety.