While Vermont’s program is somewhat modeled after a similar one in Maryland,  the Maryland program covers only hospitals while Vermont’s will cover close to all providers. The Vermont ACO will include Medicare, Medicaid and commercial payers, requiring those who participate to pay similar rates for all services.The CMS is giving Vermont $9.5 million in start-up funding to support the transition. The demonstration project is supposed to last  five years.

“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., the CMS’s chief medical officer, said.

“We will become the first state in America to fundamentally transform our entire health care system so it is geared towards keeping people healthy, not making money,” said Vermont Gov. Peter Shumlin, who negotiated a deal with HHS Secretary Sylvia Mathews Burwell.

The state seeks to have 70 percent of its insured residents covered by an ACO by 2022. The model will be considered an advanced Alternative Payment Model under the new Medicare reimbursement program, making participants eligible for a performance bonus.

Vermont will limit  per-capita  annual spending growth for major payers to 3.5 percent and Medicare growth to at least 0.1 to 0.2 percentage points below projected national Medicare growth.  In recognition of the role of behavioral health in other health, state officials also said they will seek to improve access to primary care and treatment for substance abuse, mental health and chronic disease as part of the ACO project.

The Vermont Legislative Joint Fiscal Office said that better care and an improved  state economy might well come out the initiative. However, it also  warned of such risks as uncertainty that the federal funding would cover transition costs and whether all providers will be adequately represented.