[B]URLINGTON — A member of the Green Mountain Care Board challenged the state’s largest hospital system to reduce prices without seeking more money from government programs.
The University of Vermont Health Network says the amount it charges commercial insurers for patient services makes up for low prices that Medicare and Medicaid pay.
Dr. Allan Ramsay on Wednesday told top officials from the UVM Health Network that blaming the so-called cost shift for high hospital prices is unfounded.
Medicaid and Medicare pay significantly less for medical services than commercial insurers. The difference is picked up by patients who have commercial insurance. This is what stakeholders call a cost shift.
“I’ve heard for four years about the cost shift, the cost shift, the cost shift,” Ramsay said. “I’m not an economist or an actuary, but I know how to look at evidence, and if you look at the history of how this argument — this myth called the cost shift — evolved in the late ’80s and early ’90s … the evidence is just not there. And many economists are talking about that now.”
Ramsay made the comments at a hearing at the Sheraton Hotel and Conference Center in Burlington. At the hearing, the UVM Health Network presented its fiscal year 2017 budgets for the UVM Medical Center in Burlington and Central Vermont Medical Center in Berlin.
The presentation lasted more than two hours, and hospital officials spent the first 40 minutes of it talking about their vision to reform health care. That included showing a video the UVM Medical Center made with the Champlain Housing Trust called “Housing is Health Care.”
The hospital system took in $35.4 million more in fiscal year 2015 than the Green Mountain Care Board approved. In April, the board allowed the hospital system to use $12 million in ratepayer money to partner with Champlain Housing Trust and other organizations to address community health needs.
Both UVM Medical Center and Central Vermont Medical Center asked to increase how much money they charge commercial insurance companies by 3 percent over fiscal year 2016.
UVM also requested an increase in how much money it gets for patient care — from all payers, before expenses — by 4.3 percent. Central Vermont Medical Center wants to increase how much total money it gets for patient care by 11 percent.
Dr. John Brumsted, the chief executive officer of both the UVM Health Network and UVM Medical Center, said the requested 3 percent price increase is the lowest since he joined the hospital in 1996.
Todd Keating, the chief financial officer of the UVM Health Network, outlined some factors driving up revenue. They include acquisition of orthopedic surgery practices in Berlin and South Burlington, and prescription drug prices that go up 8 percent to 10 percent per year.
Jessica Holmes, an economist who sits on the board, asked UVM Health Network officials what they could do to address the rising cost of pharmaceuticals. She said insurance companies raised similar concerns about prescription drug prices.
“What we tried to do is to find discounts through purchasing in scale,” Keating said. “At times the physicians will evaluate the prescription drug formulary to find out if there’s a less expensive drug that will deliver the same quality results.”
Judy Tartaglia, the chief executive officer of Central Vermont Medical Center, pointed to national trends. She said generic drugs are often being produced by a single company that can push prices up 10 percent on drugs that once were inexpensive.
A representative of Vermont Legal Aid’s Office of the Health Care Advocate, which represents the public interest in the hospital budget process, was the first to question why the hospitals were blaming the “cost shift” for higher prices.
“The cost shift is all of our issue,” Brumsted said. “Expanding Medicaid coverage, coverage for Vermonters is the right thing to do. We’re all in favor of it. We all have to come together in the good old-fashioned Vermont way to figure out how we fund that so that we can keep the commercial rates at the rate of inflation.”
Ramsay was one of the last people to speak at the hearing. He told the hospital system to come up with specific plans to lower health care costs for Vermonters. “We just went through the (insurance) rate review process,” Ramsay said. “Vermonters are not going to depend on hope when they look and consider their health care costs.”
Ramsay also read from a 2009 study from the Medicare Payment Advisory Commission. The study was submitted to Congress and addressed the idea that Medicare, which reimburses hospitals at a higher rate than Medicaid, causes hospitals to shift costs to commercial insurers.
“Hospitals under financial pressure tend to control their costs, which makes it more likely that they profit from Medicare patients,” the study said. “In fact, we find that Medicare margins are the lowest in the hospitals with abundant resources. Therefore, it appears that hospitals are raising prices when they have the market power to do so.”
The study said costs “are at least partially under hospitals’ control.” Increases in Medicare payments could increase hospital costs, the study says. “Increasing Medicare payments is not a long-term solution to the problem of rising private insurance premiums and rising health care costs,” according to the report.
Ramsay asked the hospitals to be “more circumspect” about the impact of the cost shift “because we have to be circumspect about that when we develop the rate structure and premium increases on the (Vermont Health Connect) exchange.”
Documents describing the UVM Health Network’s budget proposals are available below. Public comments on Vermont’s 14 hospital budgets can be submitted here through Aug. 29.