[N]ine of Vermont’s 14 hospitals exceeded the amount that state regulators said they were allowed to make through treating patients in fiscal year 2015.
The University of Vermont Medical Center in Burlington, Central Vermont Medical Center in Berlin, Rutland Regional Medical Center, Northwestern Medical Center in St. Albans and five others all took in more than they promised.
After accounting for five hospitals that fell short of revenue targets, the overages represent a $49.2 million net impact on Vermont’s hospital system. The system’s total budget was about $2.2 billion in fiscal year 2015, which ran from October 2014 to September.
The news represents a blow to the Green Mountain Care Board’s efforts at slowing the growth of health care spending. As part of its regulation of hospital budgets and insurance rates in Vermont, the board approves budgets for how much revenue each hospital should make each year from patient care and sets a cap that is higher than the budgets.
In fiscal year 2014, the board approved budgets that would grow at 2.7 percent and set a cap at 4 percent; the hospital system as a whole came in under budget, but five hospitals went over their revenue targets. In fiscal year 2015, the board approved hospital budgets with growth of 2.2 percent and capped growth at 3.8 percent.
The actual fiscal year 2015 hospital revenue, after accounting for the additional $49.2 million, was about 4.4 percent higher than 2014’s budgeted revenue and 5 percent higher than 2014’s actual revenue.
Seven of the nine hospitals went far enough over their budgeted amounts for 2015 that they could face an enforcement review from the board. That means that in the upcoming fiscal year, the board may force those hospitals to lower their prices.
The highest overages came at UVM Medical Center ($27.6 million), Central Vermont Medical Center ($7.8 million), Northwestern Medical Center ($7 million), Brattleboro Memorial Hospital ($4.5 million) and Rutland Regional Medical Center ($4.2 million).
By percentage, the highest overages were at Northwestern Medical Center (7.7 percent), Copley Hospital in Morrisville (6.5), Brattleboro Memorial Hospital (6.3), Springfield Hospital (2.9) and Southwestern Vermont Medical Center in Bennington (2.7).
The data comes from a draft version of the Green Mountain Care Board’s enforcement analysis. Mike Davis, the board’s director of health system finances, presented the report Thursday.
Al Gobeille, the chair of the Green Mountain Care Board, said he sees three trends in the enforcement analysis: hospitals that made less money than expected and therefore struggled; hospitals that have taken “corrective action” because regulators foresaw their overages; and hospitals that simply went over their budgeted revenue.
“I think the point is there are a couple of hospitals who are under their budget that worry me the most,” Gobeille said. He pointed to Porter Medical Center in Middlebury, which was under budget in fiscal year 2015 by $2.1 million and recently laid off registered nurses.
“The second thing is, you have three hospitals that are over that we took corrective action against in the year we’re in now,” Gobeille said.
He pointed to Northwestern Medical Center. In the current fiscal year, the board told the hospital to cut how much it charges commercial insurers by 8 percent because the regulators knew the hospital was going to take in more than budgeted.
Stephanie Bro, the director of finance at Northwestern Medical Center, said the hospital in fiscal 2015 performed more medical services than it had budgeted for. She said there was no specific population group that caused the hospital to take in extra money.
“The third one is the hospitals that are over, making sure that we get the right guidance so that that money is returned to ratepayers,” Gobeille said. He pointed to UVM Medical Center.
Todd Keating, the chief financial officer for the University of Vermont Health Network, said two things drove up its revenue: higher volume, especially from Medicaid patients, and increased health needs because of a less-effective flu shot.
“It’s really hard to do a year-to-year comparison for the variables that we just mentioned,” Keating said. “What UVM does on an annual basis is we constantly look at ways to reduce costs.” He pointed to ways the network has improved its supply chain management.
“The board will basically tell them to take corrective action,” Gobeille said. He said the $27.6 million overage, for example, might mean UVM Medical Center would have to reduce how much it charges commercial insurers by 3 percent.
“This is the question of, ‘Are we going to regulate to what we said?’ And I think last year the board showed that … we’re not just going to let everybody have a pass, so to speak,” Gobeille said.
The regulatory board is currently going through the hospital budget process for fiscal 2017. The target growth rate will be decided in the coming weeks.
Correction, Feb. 24, 2016, 9:42 a.m.: A previous version of this article incorrectly stated the Green Mountain Care Board’s 2014 revenue cap.
