Vermont’s 14 hospitals returned budget requests that average well below the cap set earlier this year by the Green Mountain Care Board, according to a preliminary analysis released Thursday (see list at bottom).
Hospitals are seeking a 2.6 percent average increase in net-patient revenue for the coming hospital fiscal year, which begins Oct. 1. Net patient revenue is defined as payments from insurers, government and individuals for health services.
If approved, the requested increases would translate into a $56.9 million increase in hospital revenue. Total hospital revenues in Vermont last year were roughly $2.2 billion.
The board issued guidelines asking that budgets not exceed a 3 percent revenue increase, with an additional .8 percent increase allowed to cover investments that further the state’s health care reform goals. The 2.6 percent average increase includes revenues to cover hospital investments.
The governor, board members and the state hospital association lauded the lower than expected growth in hospital budget requests as a sign that health care costs are being contained.
However, the 2.6 percent increase is low in part because Gifford Hospital requested a 9.9 percent reduction in its budget. The Randolph hospital is incorporating its primary care practice as a separate nonprofit, in order to be designated as federally qualified health center.
The board does not regulate the budgets of federally qualified health centers, which subtracts $6 million from Gifford’s budget request.
If Gifford’s primary care practice were still part of the hospital, its revenue request would have called for a less than 1 percent increase, according to hospital officials.
The average statewide increase would be 2.9 percent or roughly $63.2 million when Gifford isn’t included in the calculation.
“That’s still historically low,” said Al Gobeille, the board’s chair. In 2013, the first year the Green Mountain Care Board began regulating hospital budgets, growth was 7.1 percent or $144 million, he said.
Mike Davis, who leads the hospital review process, has said that the approved revenue growth for hospitals was 2.7 percent, but actual spending won’t be known until 2015.
Hospital spending grew nationally at 4.9 percent in 2012 and 3.5 in 2011, according to the latest figures available from the federal Centers for Medicare and Medicaid Services.
Two hospitals submitted budgets that exceed the 3.8 percent cap. Springfield Hospital is seeking a 5.1 percent increase of $2.7 million for total revenue of $54.6 million.
Porter Hospital in Middlebury is seeking a 4.1 percent increase that totals $2.9 million for total revenue request of $72.7 million.
Much of the statewide increase will go to Fletcher Allen Health Care, the state’s largest hospital and only academic medical center. Its 3.7 percent increase request is $38.7 million of a total revenue figure of $1.08 billion.
The budget figures are “the raw numbers” submitted by hospitals, Gobeille said, and it’s too early in the process to say whether they will be modified by the board.
The board also reviews expenditures as part of its budget review process to determine “the financial health” of the institution, Davis said.
There are “a lot of moving parts” the board needs to examine before the 2.6 percent figure will be final, and it will require additional work to determine whether hospitals will be asked for revisions prior to approval.
In reviewing the hospitals’ budgets, the board will examine whether the revenue and expenditures are reasonable, can ensure the hospitals’ solvency and meet the state’s cost-containment goals.
Hospitals account for close to 44 percent of Vermont’s more than $5.2 billion in annual health care spending.
Reducing costs is the “linchpin” of Vermont’s health care reform efforts, Gov. Peter Shumlin said in a statement.
It’s a key component of making his signature policy initiative, single-payer — or a public universal health care program — viable, because such a program would have to cover the lion’s share of health care spending.
Hospital officials will appear before the board Aug. 26-28 at a public hearing to detail the reasons underlying their individual requests.
The board is expected to vote on hospital budgets Sept. 11 and budgets must be approved by Sept. 15 for the start of the hospital budget year in October.
