MONTPELIER -- A new state health care law will require the administration to report on whether Vermont should prohibit insurers from paying independent physician practices less than hospitals for the same services.

Lawmakers framed the need for the report as a discussion of whether Vermont should protect its private physician practices or encourage the current trend toward hospital employment.

The number of full-time physician equivalents employed by Vermont's hospitals grew 22 percent between 2007 and 2012, from 947 to 1,207, according to figures from the Green Mountain Care Board.

That's a good thing according to the CEOs of the two largest hospital networks serving the region.

"If you're really going to do population management, versus trying to control market share, then physicians should be willing to join a network to manage populations," said Dr. Jim Weinstein, CEO of Dartmouth-Hitchcock health system.

"Regardless of how much an individual physician, nurse practitioner or physical therapist wants to do the right thing every time and provide the highest quality of care they're human and you can't always do that," said Dr. John Brumsted, CEO of Fletcher Allen Partners. "If you bring providers together in larger groups you can afford, because economies of scale, to have the infrastructure to support them."

As an example, Brumsted cited the wider use of electronic medical records to collect health data and better manage the care of groups and individuals.

"Reimbursement is, appropriately in my view, being tied to the quality of services provided," he said. "Just to be able to report your quality measures is an expensive endeavor."

Electronic medical records track patient data that can be analyzed and used to deliver better care. Part of Vermont's health care reform effort is to pay providers for keeping their patients healthy, instead of paying them for each service.

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Fletcher Allen CEO Dr. John Brumsted. (File photo by Josh Larkin/VTDigger)
Fletcher Allen CEO Dr. John Brumsted. (File photo by Josh Larkin/VTDigger) (Josh Larkin)
Paul Reiss, a family medicine doctor in Williston, said physicians in private practice have embraced electronic medical records and changing payment models.

Reiss is the executive director of Healthfirst Inc., an association of 130 independent doctors in Vermont that aims to protect their long-term interests in the region.

There is federal assistance available for providers to build their record systems, he said, and the state has invested in supporting those efforts through the public-private partnership Vermont Information Technology Leaders, which helps build provider IT systems.

Hospitals may be able to manage the health of a larger population, but independent practices are better able to respond to the needs of the population they serve, according to Reiss.

"We can adapt and change practices more quickly," he said.

That's because of the flat organizational structure of a private practice versus the bureaucracy it takes to run a hospital system or provider network. Doctors who work in hospital-owned practices cede decision-making on how care is delivered to managers and administrators, Reiss said.

In addition, the trend toward hospital employment hasn't reduced the cost of services for consumers, he said.

Payments negotiated between providers and insurers are calculated using an estimate of a provider's overhead, but when it comes to a hospital's overhead those costs can be "undefined and potentially limitless, Reiss said.

The federal government allows hospitals to bill Medicare for costs associated with operating an emergency room and other essential services they provide. Private insurers aren't required to pay hospitals more, but they often do.

In some cases, independent doctors are a better value for consumers because they provide similar quality services at a lower cost, Reiss said.

The shared-savings program Vermont is piloting for Accountable Care Organizations could go a long way to answering whether independent physicians offer better value.

Those agreements allocate patients to providers within an ACO. If the ACO can care for the attributed patients for less than an agreed upon amount, then the ACO keeps a portion of the savings based on how well it meets a set of quality measures.

If the ACO associated with Healthfirst, which includes many of the group's independent physician practices, is able to generate shared savings for its members while OneCare Vermont, the ACO that includes all of Vermont's hospitals and Dartmouth-Hitchcock Medical Center, doesn't, Reiss said it would highlight the value offered by independent physicians.

The shared-savings programs were launched this year and the results won't be available until several months into 2015, according to state regulators.

Meanwhile, the legislative report on independent physicians' reimbursement is due to lawmakers Dec. 31.