[E]ight of Vermont’s largest 14 hospitals took in more in revenue from treating patients in fiscal year 2016 than regulators approved.
The surpluses mean that the whole $2.3 billion hospital system went $60.3 million over budget, according to data released Thursday by the Green Mountain Care Board, which regulates hospital budgets.
Six of the hospitals took in so much excess revenue that they could face enforcement action. They testified on Tuesday before the board, which can force hospitals to give the extra money back to commercial insurance ratepayers.
This is the second year in a row that more than half of Vermont hospitals have exceeded budgets set by regulators. In fiscal year 2015, nine hospitals went over budget, and the hospital system as a whole took in $49.2 million more from patients than budgeted.
The Green Mountain Care Board’s budget process is designed to regulate the total amount of patient care revenue that hospitals can receive — that’s the amount of money they get from Medicare, Medicaid, commercial insurers, and self-pay patients, before factoring in the hospital’s expenses.
The overages are not the same as profits, but regulators have assumed in the past that hospitals go over their regulated revenue maximums because they are charging insurance companies too much money and therefore need to lower prices.
The biggest surpluses in fiscal year 2016 were at the two hospitals within the University of Vermont Health Network—the UVM Medical Center in Burlington ($25.4 million) and Central Vermont Medical Center in Berlin ($16.1 million)—which collectively account for $41.5 million of the $60.3 million system overage.
The other hospitals that exceeded budget targets are Rutland Regional Medical Center ($10.2 million), Southwestern Vermont Medical Center ($7.9 million), Northeastern Vermont Regional Hospital in St. Johnsbury ($3.5 million), and Northwestern Vermont Medical Center in St. Albans ($1.8 million).
Copley Hospital in Morrisville went over by $1.8 million, and North Country Hospital in Newport by $1.2 million. The board decided to look at Copley’s budget again in six months, because they just cut prices in January. North Country’s prices won’t be reset by the board because the overage is such a rare occurrence.
Meanwhile, most of the state’s smallest hospitals took in less revenue than they anticipated: Springfield Hospital ($2.3 million), Mt. Ascutney Hospital and Health Center in Windsor ($1.7 million), Gifford Medical Center in Randolph ($1.4 million), Grace Cottage Hospital in Townshend ($1.1 million), Brattleboro Memorial Hospital ($731,000), and Porter Medical Center in Middlebury ($520,000).
Because the board regulates patient care revenue, and not expenses, taking in less revenue is not the same as taking a loss. Rather, it’s a sign that the hospitals either did not see as many patients as expected, or that they are not charging insurance companies enough money for services.
“If we choose to do anything, I think what we choose to do should be consistent,” said Jessica Holmes, an economist who sits on the Green Mountain Care Board, on Tuesday. “I’m thinking about ensuring the financial viability of the hospital but also fairness to consumers and to taxpayers.”
Holmes read the board’s enforcement policy, which says the board can reduce hospital prices in the current year, reduce the hospital expenses in the current year, and use the information to adjust the hospital’s budget in a future budget year or take a deeper look at the hospital’s budget.
All six hospitals that presented on Tuesday gave the board an explanation for what drove up revenues in fiscal year 2016. Explanations included increased traffic from talented orthopedic surgeons, increased market share, and increased revenue from patients paying for expensive prescription drugs.
Tom Huebner, the CEO of Rutland Regional Medical Center, said $5.6 million of the hospital’s $10.2 million overage could be attributed to increased market share, and another $3.9 million could be attributed to overestimating how many patients would not be able to pay their bills.
Huebner was the only hospital executive who proposed to reduce the hospital’s prices immediately. The hospital already dropped its prices by $5.4 million in April, followed by another $1.4 million in October, because it went over its budget in fiscal year 2015. He now plans to drop prices another $1.1 million in May.
“We absolutely need to give that back, and we have tried to do that along the way, because we think it doesn’t belong to us,” Huebner said. “We think that’s how we should do it, and frankly our prices could use some going down.”
Todd Keating, the chief financial officer for the UVM Health Network, said the network’s two hospitals started to exceed budgets in fiscal year 2015 because more people had access to Medicaid or commercial insurance through Vermont Health Connect.
Additionally, the hospital is getting paid up front for care and is not writing off bad debt or charity care.
Keating said the same thing happened in fiscal year 2015, when the network’s two Vermont hospitals also exceeded patient revenue targets by $35.4 million. But Keating said the hospitals already have data from the first five months of fiscal year 2017, and the budgets are “not materially out of whack.”
For fiscal year 2015, the board allowed UVM Medical Center and Central Vermont Medical Center to use $12 million of the surplus for a partnership with community organizations such as Howard Center and the Champlain Housing Trust to improve population health.
The Green Mountain Care Board plans to look at each hospital’s budget from the lens of “key performance indicators,” including not only patient care revenue but operating expenses, operating margins, and cash on hand, among other things.
The board set a deadline of April 13 to decide what to do with each hospital’s budget. Public comments to the Green Mountain Care Board can be submitted here.