[M]embers of the Green Mountain Care Board raised questions Tuesday about growth at the University of Vermont Health Network.
The board, which regulates hospital budgets and health insurance prices, brought up several concerns while three hospital finance officials explained why the network took in $41.5 million more in fiscal year 2016 than they budgeted.
The UVM Health Network started in 2011 under the name Fletcher Allen Partners. It was designed to be an umbrella organization for what are now the UVM Medical Center and the Central Vermont Medical Center.
The network has grown substantially since 2011. The UVM Health Network now controls three hospitals in upstate New York, and will control Porter Medical Center in Middlebury by the end of the month.
Cheyenne Holland, the chief financial officer for Central Vermont Medical Center, said Tuesday that the number of outpatient practices the network owns in the region has grown by 10 to 15 practices in just 3 to 5 years.
“We are expanding out into our community,” Holland said. “What we have seen is a need for us to find other labor. We have not been able to recruit fast enough in order to meet the needs and the demand.”
She said the hospital has looked to traveling nurses in order to maintain staffing. She said those traveling nurses have been a major expense for the hospital system, and they hope to eliminate their use by the end of May.
Con Hogan, a member of the board, questioned what he called “rapid expansion” of the network’s doctors offices near Central Vermont Medical Center. “I live in Washington County, so can’t help but notice,” he said.
“You folks have put together a pretty significant institution,” Hogan said, referring to a building on Barre-Montpelier Road in Berlin that offers urgent care, physical therapy, and rehabilitation therapy, among other things. “It’s a big deal.”
“My assumption is that you’ve done this under a period of time so you’ve never come under the (certificate of need) requirements,” Hogan said. The certificate of need process requires the board to approve new capital investments in health care in an effort to control health system costs.
Holland said the hospital system leases the building, but does not own it, and that its use grew over the past five to 7 years. She offered to get Hogan additional information about the facility.
Jessica Holmes, an economist who sits on the Green Mountain Care Board, asked how the network sets its hospital budgets. “Are you one hospital? Are you two hospitals? Are there firewalls between the budgets? How do you allocate fixed costs between the hospitals,” she asked.
Holmes said the documents that the UVM Medical Center and Central Vermont Medical Center explaining the $41.5 million in overages are extremely similar. She joked that they almost looked “plagiarized.”
The approved 2016 budgets were $1.1 billion for the UVM Medical Center and $174 million for Central Vermont Medical Center. The hospitals went over by $25.4 million (2.2 percent) and $16.1 million (9.2 percent), respectively.
Todd Keating, the chief financial officer of the UVM Health Network, said the hospitals work together more and more as time goes on. “When you build a network, your hospitals now become the departments within the network, so they do begin to start to work with each other.”
He said the UVM Medical Center and Central Vermont Medical Center work together “all the time.” Keating said the UVM Medical Center also works closely with the network’s three hospitals in upstate New York because of their proximity.
“We look at it as a network,” Holland added. “We want to come together with a budget process and look at us as one. As we’re moving resources across our network, we really need to be concentrating on our story from a network perspective.”
Holmes brought up the concept of an economy of scale, in which the unit costs for products and services will go down as a company gets bigger and spreads the same fixed costs over the larger company.
“One of the things I was hoping to see, and looking to see and I’m not sure that I can see is that one of the benefits of affiliation should be these economies of scale that we talk about, and efficiencies,” she said.
“When I look at the growth rate in operating expenses, I would’ve expected to see that starting to fall, and it’s actually … among the highest of all the hospitals,” she said. “So when and where and how are we going to start to see the efficiency benefits?”
Keating said the efficiencies would start to come when the network installs its new electronic health records system, EPIC, across its hospitals and doctors’ offices. The network filed a certificate of need application for the $112.4 million project in January.
“Every entity right now is an island to itself from a technological perspective,” with different billers trained in different operating systems, Keating said. “But I’m not going to need all the same billers once they’re on EPIC.”
“It’s putting this infrastructure in place, which will deliver the efficiencies,” he said. “Automation in the administrative areas is really the driver of efficiency.”
The Green Mountain Care Board’s next meeting is April 13.
