When top guns at Fletcher Allen Health Care submitted a budget at the end of July well above the threshold stipulated by the Green Mountain Care Board, the state regulators called them in to testify.
Before the board prepares to rule on all 14 Vermont hospital budgets this week, it called in Fletcher Allen CEO John Brumsted and CFO Roger Deshaies last Thursday to discuss why the state’s largest hospital budget was set to increase by 7.87 percent. Fletcher Allen exceeded net revenue caps by 4.12 percent for fiscal year 2013 (prior to the provider tax). The threshold set by the board, which regulates hospital budgets, was 3.75 percent.
Anya Rader Wallack, chair of the board, said in an interview that the board invited Fletcher Allen officials to the meeting. “We didn’t see how all of the expenditures they suggested were a slam dunk within our guidelines,” Wallack said.
Act 171, which went into effect on July 1, gives the Green Mountain Care Board the authority to regulate hospital budgets across the state. That role was formerly the purview of the Vermont Department of Banking, Insurance, Securities and Health Care Administration — now known as the Department of Financial Regulation. The board placed a 3.75-percent cap on the amount of additional funds that hospitals can generate from patients (also known as “net patient revenues”) this fiscal year. Hospitals were allowed, however, to seek certain exemptions from the cap.
Brumsted and Deshaies argued on Thursday that if the board exempted about $44 million — in Vermont State Hospital and potential Medicaid reimbursements, changes to the provider tax, and information technology upgrades aimed at meeting health care reform goals — the hospital’s net revenue increase would come in at 3.18 percent.
Overall, the board seemed very pleased with Brumsted and Deshaies’ proposal, and board members Al Gobeille and Con Hogan commended Brumsted’s leadership and hard work in his first year as CEO.
But the board didn’t issue a decision as to whether they would approve the largest health care budget in the state. Fletcher Allen’s net revenue is more than $1 billion.
Decision process
Fletcher Allen and other hospitals across the state submitted their FY 2013 budgets to the board on July 26. Using decision guidelines posted on the Green Mountain Care Board’s website, the regulators called in six hospitals on Aug. 30 that did not seem to jibe with the board’s standards.
Those hospitals were: Porter Medical Center in Middlebury, Copley Hospital in Morristown, Northwestern Medical Center in St. Albans, Southwestern Vermont Medical Center in Bennington, Rutland Regional Medical Center and Fletcher Allen. Representatives from Fletcher Allen couldn’t make the Aug. 30 meeting, so they met with the board on Thursday.
The 3.75 percent increase that the board used as its threshold was based on the estimated 2.76 percent — that then increased to 2.9 percent — rate of inflation to the hospital input market basket, which is established by the Centers for Medicare and Medicaid Services (CMS).
The board added some wiggle room for inflation, Wallack said, to account for cost hikes from the state’s aging population, necessary technology upgrades and other investments. As VTDigger reported in April, this cap would result in a $78 million rise on about a $2 billion state revenue base.
After reviewing all of the hospital budgets and meeting with those hospitals that appeared to fall short of its guidelines, the board will decide whether to approve or shut down those budgets at its meetings this Tuesday and Thursday.
If the board declines a hospital’s budget, Wallack said, the board has two avenues it can take.
“We have a choice as to whether we tell them to change it (and bring it back) or whether we dictate in detail where we want them to cut their budget,” she said.
Budgetary pitfall?
Fletcher Allen has a rickety revenue line built into its budget.
Of the $44 million that Brumsted and Deshaies want the Green Mountain Care Board to exempt from Fletcher Allen’s revenues, $30 million is pending. Those funds are enhanced Medicaid reimbursements through the Centers for Medicare and Medicaid Services for graduate medical education and increased payments for professional services.
Deshaies said in an interview that Fletcher Allen filed for this funding opportunity for the first time close to a year ago.
“We applied for this nine months ago, and we thought we would have this thing done within a few months. But we’re still waiting,” he said. “We believe we’ve complied with CMS rules, but for some technical reason, they could say we have not.”
If the funds are approved, Fletcher Allen would raise its annual academic support to the University of Vermont by $14.3 million, and beef up their budget with the additional $15.7 million. In keeping with CMS rules, the Vermont Department of Health Access would administer the funds.
What if Fletcher Allen doesn’t get the funding, which has been built into its budget?
“We would be out about $16 million and much of that would come off of our bottom line,” said Deshaies. “In our budget, we assume we’re going to get it. So, if we don’t get it, we aren’t going to be able to push it on (this year’s) rates. It would fall onto the following year.”
