Health Care

Hospital budget hearings put payment, delivery reform in the spotlight

The Green Mountain Care Board (left) hears from hospital executives during the first day of budget hearings Tuesday, Aug. 26, 2014. Photo by Morgan True/VTDigger
The Green Mountain Care Board (left) hears from hospital executives during the first day of budget hearings Tuesday in Montpelier. Photo by Morgan True/VTDigger

After all the attention, local and national, that the state’s planned single-payer program has received, the other half of Vermont’s health care reform agenda is getting its day in the sun — even if fewer people are tuning in.

State regulators and hospital executives engaged in a mostly collegial discussion of how health care should be delivered and paid for in the coming years.

The overarching theme was how health care providers, working with government, can move the industry from a volume-driven business model that shifts costs to the commercially insured to a model that offers stable payments tied to health outcomes.

In the first day of hospital budget hearings, the Green Mountain Care Board heard from Vermont’s largest hospital network, as well as three smaller hospitals, all of which described their efforts to step from one paradigm into the next.

The board will vote before Sept. 15 on each hospital’s budget request and it could make adjustments to revenue targets or rates. The approved budgets will take effect Oct. 1, the beginning of the hospital fiscal year.

All 14 hospital’s in the state will present their budgets to the board between now and Thursday. Budget narratives describing each hospital’s requests in detail can be found here.

Board members asked the hospital executives whether they had considered this year’s budget in the context of where they would like to see their hospitals in five or 10 years.

Fletcher Allen Partners, formed in 2011, presented a combined budget for Fletcher Allen Health Care and Central Vermont Medical Center. Fletcher Allen Partners is the parent organization of Fletcher Allen, CVMC and two hospitals in northern New York.

John Brumsted, CEO of Fletcher Allen Partners, presents his hospital network's budget to the Green Mountain Care Board on Tuesday, Aug. 26, 2014. Photo by Morgan True/VTDigger
John Brumsted, CEO of Fletcher Allen Partners, presents his hospital network’s budget to the Green Mountain Care Board on Tuesday. Photo by Morgan True/VTDigger

Its CEO, John Brumsted, said the network has created efficiencies through scale, citing the network’s cardiovascular programs as an example.

Fletcher Allen Partners ended the cardiac surgery program at Champlain Valley Community Hospital in Plattsburgh, New York, but kept its heart catheterization program — a process to diagnose and treat some heart conditions. That allowed them to eliminate duplicate services, Brumsted said.

By shifting resources within their network, Fletcher Allen Partners said they can reduce systemwide costs and improve outcomes by providing basic care at its regional hospitals and sending more tertiary cases to its flagship hospital in Burlington.

The network plans to try to replicate the model with more services in the near future.

Fletcher Allen Partners is also expanding its medical residency programs at member hospitals to boost their physician recruitment and retention.

Brumsted said his network is in talks with organizations in Vermont and New York to further “gain scale,” and Fletcher Allen Partners would likely seek regulatory approval for those deals sometime in 2015.

For providers that can’t scale to create efficiencies, the demands of meeting health care reform initiatives can mean tough decisions.

North Country Hospital’s utilization has shrunk and its debt has grown over the past three years. The Newport hospital cut staff and lost others through attrition. At the same time, it’s expected to make similar investments in health care reform as Fletcher Allen, said CEO Claudio Fort.

In 2015 the hospital expects to spend 30 percent of its capital budget on IT investments, mostly to better track quality metrics that are necessary to participate in payment reform initiatives like ACO shared-saving programs, he said.

It’s becoming a question of “Who do we have to partner with, or affiliate with, or align with to continue to provide (our) services,” Fort said.

The difficulty then becomes deciding what services to keep at a community hospital like North Country, and what to shift elsewhere in the system, he said.

Gifford Medical Center’s CEO Joseph Woodin sees a different option for smaller community hospitals — or at least for his hospital in Randolph.

Instead of hitching its wagon to a larger hospital’s network, Woodin said, Gifford is focused on expanding local services and integrating with existing local providers.

Gifford has moved to fill a “void” in elder services by building a retirement community that will include a nursing home, assisted and independent living facilities and an adult day care program.

It also recently formed its own parent organization — Gifford Health Care — of which its hospital is now a part. The move will allow it to expand primary care, dental and behavioral medicine practices with government support.

Gifford is one of three Federally Qualified Health Centers that also owns a “Critical Access Hospital” — federal designations for community health centers and rural hospitals — in the nation.

Springfield Medical Care Systems, the parent of Springfield Hospital, said its main focus is primary care, but the demographics of the population it serves make that difficult.

The Springfield-area is economically depressed and the hospital serves many elderly and low-income people with a high incidence of chronic conditions, including mental health and addiction, its executives said.

Its revenue request exceeds the guidelines set by the board, but it’s necessary for the hospital to continue providing services and create an operating margin that will allow them to continue to invest in the future, executives said.

But Springfield’s agreements with commercial insurers have a capped rate increase, and government payers, Medicare and Medicaid, set their own rate.

To make up the difference, Springfield hospital would need to cut discounts to people paying without insurance.

Board Chair Al Gobeille chided the Springfield executives for requesting a revenue increase beyond the guidelines without giving a clear vision of how they would use it to position their hospital for the future.

“If I let you out with my vote … what am I buying?” Gobeille asked. “Sell me on it, guys, because right now I’m not buying.”

Budget highlights by the numbers

Fletcher Allen Health Care & Central Vermont Medical Center

• $1.25 billion combined net patient revenue request, or 3.6 percent increase over last year.
• 40 percent of Fletcher Allen patients covered by Medicare account for 30 percent of its revenue. Commercially insured are 32 percent of patients and 50 percent of revenue. Medicaid is 13 percent of patients and 7 percent of revenue.
• $6.3 million, estimated combined losses due to lower number of Vermont Health Connect users buying commercial insurance, and more qualifying for Medicaid.
• $76 million in anticipated facility related project spending for FY 15.
• 67 full-time positions expected to come online in FY15 between the two hospitals.

North Country Hospital

• 2.4 percent reduction in net patient revenue request for a total $73.6 million budget
• 8.3 percent rate increase requested to compensate for drop in utilization and make 1.7 percent operating margin.
• $2.1 million in operating losses in FY 2012 and FY 2013
• 46 full-time equivalents lost this year due to layoffs and attrition.
• $3.2 million in capital investments, with 30 percent dedicated to IT investments.

Springfield Hospital

• 5.1 percent increase to net patient revenue. A $2.6 million increase for a total budget of $54.6 million.
• $861,000, the value of Springfield’s request for increased revenue beyond the board’s guidelines.
• $5.6 million, the total value of uncompensated care and Medicaid reimbursing less than cost last year.
• Seeking a 2 percent operating margin it says is necessary to bounce back from a rocky FY 2013.
• Emergency department built for 12,000 annual visits, currently seeing close to 16,000. Springfield plans to build an addition to it’s emergency department with dedicated space for patients with mental illness

Gifford Hospital

• -9.9 percent, how the Green Mountain Care Board reported Gifford’s budget request; 1 percent is how much their budget will actually increase
• $6.7 million, the amount shifted out of Gifford Hospital’s budget now that much of its primary care is done as a community health centers
• $57.7 million, the budget that the Green Mountain Care Board will consider; $64.4 million Gifford’s actual budget for FY 2015
• 2.5-3 percent, Gifford’s target for its operating margin. Nonprofit hospitals that exceed that should re-examine their tax designation, according to CEO Woodin.

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Morgan True

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  • jake samuelson

    The Green Mountain Care Board should have the courage of its conviction. The way to integrate care is to force alignment with FAHC and DHMC. If the GMCB reduces budgets by just one or two percent hospitals will be financially incentivized to align with one of the tertiary centers. Dr Brumstead is correct to believe that economies of scale can occur. The biggest economic scale will occur with the reduction in the tremendous amount of unnecessary administrators. My local hospital has nine vice-presidents. Once all the hospitals are aligned a global payment can be made through OneCare and we can show the nation that a single payer model can work.