The number is less than half of the $60.3 million in surplus patient care revenue that regulators at the Green Mountain Care Board have said Vermont’s hospital system took in during fiscal 2016, which ended in September.
The Vermont Association of Hospitals and Health Systems told the committee Wednesday that the hospitals should be judged on the profits they make — revenue minus expenses — as opposed to the amount of money they receive from patient care.
That would represent a change from the way the Green Mountain Care Board and its oversight predecessors have regulated hospitals for more than 20 years.
The question comes up as state budget writers looking for savings turn their attention to the money hospitals receive for charity care.
Patient care revenue is the money hospitals get from Medicare, Medicaid, commercial insurers and self-pay patients, before factoring in the hospital’s expenses. The revenue also includes Medicaid money dedicated for charity care.
Since the Green Mountain Care Board was created in 2011, it has approved the amount each hospital can take in from patient care each year, as a way of controlling the rise in health spending. When a hospital takes in more revenue than budgeted, the board will often force it to cut how much it charges commercial insurance companies.
In recent years, the board chose to cut the amount Copley Hospital in Morrisville charges insurance companies by 4 percent and the amount Northwestern Medical Center in St. Albans charges by 8 percent.
In the upcoming fiscal year, the Green Mountain Care Board has said it 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.
It’s not clear if that new guideline applies to how the board will handle budget surpluses. The board will meet Thursday to decide what to do about six hospitals that exceeded their budgets in fiscal 2016.
At the committee hearing Wednesday, Rep. Kitty Toll, D-Danville, the chair of House Appropriations, said the committee needed to hear from the hospital association while preparing for a conference committee to hammer out budget details with the Senate.
Hospitals are at risk of losing a portion of the $37.4 million they get for charity care. Gov. Phil Scott’s administration planned to cut 10 percent of that money as part of its original budget, and lawmakers have looked to cut more in order to redistribute the money to mental health.Toll said she wanted to hear from the hospital association about money hospitals get for charity care. She also asked the association’s lobbyist about how much money the hospitals went over budget in the most recent fiscal year. “Was it 60 or 70 million (dollars)?” Toll asked.
Devon Green, the vice president of government relations for the association, responded: “I would be happy to go into that. I would actually say it’s more 28 (million).”
Green described the board’s annual cap on revenue from patient care as a “target” or a “benchmark” that hospitals did not meet because of health care reform efforts and issues with Vermont Health Connect “in the middle of 2014 and 2015.”
“So there was a target set,” Green said. “Hospitals did exceed that target. The number being reported is the $60 million, but that is just net patient revenue, so that is just the amount of money coming in from patients. It’s not the cost of those patients.”
“So once you take in those expenses that are due to having increased utilization, with increased utilization that causes overage, you get also increased costs because you have to provide the services, and so, once that cost is taken out, that’s where you get the $28 million,” Green said.
“That’s the actual amount that’s the variance from the target,” she said, saying it starts with “this ‘oops’ number from the increased utilization.”
Green also told the committee about the history of the Green Mountain Care Board. The board was created under Act 48 of 2011 to replace the Department of Banking, Insurance, Securities and Health Care Administration and regulate single-payer health care.
“Because we have this small population spread out over a mountainous geography, Vermont has gone into a direction of regulating care,” Green said. “With that we created the Green Mountain Care Board. We have set up a regulated hospital system. It’s worked for Vermont so far.”
“What the Green Mountain Care Board does is it looks at the growth trend,” Green said. “This year, the trend was 4.4 percent, which is down from 5 percent last year and down from 8.8 percent 10 years ago.”
“So this sort of payment reform is slow, but we think that this regulatory process is working, as is evident from the 50 percent cut in the growth rate in hospitals over the last 10 years,” Green said.
In fiscal 2015, nine hospitals went over their budgets by a total of $49.2 million, according to data from the Green Mountain Care Board. During that year, hospitals had cumulative profit margins of $110.4 million, according to data from the board.