Editor’s note: This article is by Lisa McCormack, of the Stowe Reporter, in which it was first published July 30, 2015.
[C]opley Hospital plans to lower its rates by 3 percent next year, believing that net patient revenue will increase.
Net patient revenue includes payments the Morrisville hospital receives from patients, government programs such as Medicare and Medicaid, and insurance payments for patient care.
Copley projects revenue will rise 3.1 percent, with increases in the number of patients and in payment rates.
Rates won’t be reduced across the board, but will be applied to the markup for chargeable supplies and drugs.
Copley is proposing a $61,638,926 operating budget, up 3.5 percent from its $59,527,135 budget for 2015.
The nonprofit community hospital is among 14 Vermont hospitals that recently submitted proposed budgets for fiscal year 2016 to the Green Mountain Care Board. The budgets run from Oct. 1, 2015, through Sept. 30, 2016.
The state board reviews hospital budgets annually and offers suggestions on how hospitals can lower costs while providing high-quality care.
Calculating future revenues can be tricky, said Melvyn Patashnick, Copley’s president.
Everything must be carefully weighed, from the number of patients likely to be covered by Medicare or Medicaid, rather than commercial insurance, to the number of patients receiving specific outpatient services. The hospital also has to be prepared to absorb unanticipated costs.
“Just a small difference in what you estimate and collect can make a huge difference,” Patashnick said.
One thing working in the hospital’s favor is that the number of people using its services has increased slightly in recent years.
“We provide very good quality care,” Patashnick said. “The community appreciates what we do, so they support us by saying, ‘I want my care to be done at Copley.’”
Health care reform
Federal and state reforms in health care are likely to affect Copley’s budget in coming months and years.
The hospital already invests in OneCare Vermont, a program that creates spending targets for Medicare patients. Hospitals work to provide high-quality care while reducing costs by becoming more efficient.
It costs money to run OneCare Vermont and collect and report the data.
“We’re trying to adjust to changes in the health care environment in terms of the reforms that are coming,” Patashnick said. “There are (financial) risks, but there are purposes to those risks.”
Copley also benefited from the Affordable Care Act requirement that all U.S. citizens have health insurance as of Jan. 1, 2014. Last year, just 3 percent of its patients weren’t covered by commercial insurance, Medicare, or Medicaid.
The Green Mountain Care Board is considering a shift in the way Vermont hospitals are reimbursed from the current fee-for-service model — in which they charge for each service provided — to a global model. Under that setup, hospitals could be reimbursed a set amount for each patient, or given an annual lump sum, based on their needs.
Reform advocates contend the current setup encourages hospitals to provide unnecessary services. Paying hospitals based on a global model would encourage them to look for ways to save money while still providing high-quality care, advocates say.
How this would affect Copley is uncertain.
It’s a “critical access” hospital, a designation given to rural Vermont hospitals with up to 25 beds serving areas with sparse populations. Its fixed expenses are generally higher than average because it must have enough staff to provide a wide range of care, even though it sees fewer patients than larger hospitals.
Now, it receives somewhat higher Medicare reimbursements to help compensate for its larger fixed costs.
“The devil is in the details,” Patashnick said.
Surgery
Surgery is the largest source of revenue for the hospital, Patashnick said.
Its Mansfield Orthopedics group is nationally renowned and attracts patients from throughout New England and Canada, Patashnick said.
The hospital is still waiting for the Green Mountain Care Board to approve a proposed $12.5 million surgical unit to replace the one built in 1979.
The hospital performs about 2,000 surgeries annually, and the suite has never been renovated to accommodate modern technology.
The hospital needs a certificate of need from the state board before construction can begin.
The Green Mountain Care Board sent Copley a list of
questions about the project, the hospital has responded, and the board is expected to hold a public hearing soon.
“We are anticipating a positive decision,” Patashnick said. “We have a very responsible financing plan and the need speaks for itself.”
Once built, the suite isn’t expected to affect the number of surgeries performed at the hospital, Patashnick said.
“It’s just replacing what we have,” he said.
For the third year in a row, the 14 proposed Vermont hospital budgets show a historically low rate of growth, according to the Green Mountain Care Board.
While the numbers are still being reviewed and may be adjusted during budget hearings next month, the preliminary 3.6 percent growth in average net patient revenue is in line with the board’s recommendations.
Additionally, the 4.3 percent weighted average increase in rates is the lowest in 15 years, according to board chairman Al Gobeille.
Hospitals were required to submit their budget proposals by July 1. In late August, hospital administrators will explain their budgets to the board. The board will vote on the budgets in early September.
