The cost of health care increases about $1 million a day in Vermont, according to data from the Department of Banking, Insurance, Securities and Health Care Administration.
The newly appointed Green Mountain Care Board is charged with analyzing the cost drivers that are causing this dramatic increase in medical expenditures. The board began its analysis of hospital budgets last week as part of its effort to create a single-payer style health care system that reins in overall spending.
Gov. Peter Shumlin, the newly Democrat who campaigned on a single-payer health care system last year, has said that containing medical costs must be a prerequisite to providing universal coverage to Vermonters.
Hospitals are the biggest health care providers in the system, and year over year, higher than inflation increases in hospital budgets have driven up the state’s total expenditures. Though hospitals have seen low percentage increases in the cost of care this year (about 4 percent on average), just a few years ago, many facilities saw substantial bumps in expenditures (about 9 percent on average between 2000 and 2009).
Mike Davis, director of hospital regulatory operations for the Vermont Department of Banking, Insurance, Securities and Health Care Administration, gave an overview of the Vermont hospital budget review process at the board’s meeting on Wednesday.
Each year, Davis explained, each of the 14 hospitals in the state develops a budget to present to its board. Later, the state agency reviews each budget and approves “rate” increases for hospitals. This includes the price increases a hospital can charge for services it offers patients. The agency is also required to approve “certificates of need” from hospitals for new health care projects.
The fiscal year for the hospital budgets begins Oct. 1. BISHCA sets a system wide rate for budget increases each year. The purpose of the rate system is for the state to establish reasonable rate and budget increases. For 2012, the median rate increase was 6.1 percent. According to a BISHCA press release, state hospital budgets will increase by a system-wide total of 3.8 percent for this fiscal year.
The Green Mountain Care Board will revamp the budget review process that has been in effect since 1983. Under Act 48, the legislation that created the board to implement a universal health care system, the commissioner of BISHCA must recommend statutory modifications to the budget review process to allow participation by the Green Mountain Care Board.
At this point it is unclear exactly what the new budget review process will look like, or how it would affect the new single-payer style health care system the board is charged with designing.
Board member Karen Hein said one of the main issues in looking at budgets is putting all of the pieces from separate hospitals together into one budget — something that has not happened yet in Vermont.
“We want to be able to have a global budget for health,” Hein said.
She said one of the main issues the board may look into is how broadly it can define the budget. For example, will it include preventive care that would help to lower the number of visits to the hospital?
“Cost shifting,” Hein said, will also be a consideration. Cost shifting is a pricing mechanism that ensures hospitals receive enough revenue to operate even when some patients don’t pay for the care they receive. That cost is eventually allocated to other patients in some way—generally through increased costs of service.
Another issue the board will likely address is the amount of money that flows out of state to hospitals like the Dartmouth-Hitchcock Medical Center in Lebanon, N.H.
Allan Ramsay, a board member and a family physician, said he hopes the board will shift from focusing solely on profit margins in hospital budgets to understanding the mission of the fiscal management of hospitals, which is to improve the health of Vermonters.
Hein added that she would like to see more incentives for hospital management to improve safety and the quality of care in Vermont’s hospitals.
The board also passed a resolution to hold regular meetings every Tuesday at 1 p.m. starting Nov. 15. The meetings will be held in the third floor conference room at the Department of Banking, Insurance, Securities and Health Care Administration, 89 Main St., Montpelier.
