[V]ermont’s regulated hospitals are seeking to take in $2.5 billion from patients and insurance companies in the upcoming fiscal year, an $86.9 million increase over the current year.
The 14 hospitals submitted their budget proposals to the Green Mountain Care Board on July 1. The board, which regulates both hospital budgets and health insurance prices, released comprehensive information on the proposals Wednesday.
The budgets are for fiscal year 2018, which starts Oct. 1, the same as the federal fiscal year. The board will hold hearings in August on the proposed budgets and approve or modify each hospital’s budget by Sept. 15.
The board’s analysis shows that hospitals are seeking to raise prices that commercial insurance companies pay by an average of 2.4 percent — the lowest average price increase hospitals have sought in 17 years—because five hospitals were ordered to limit their price increases in April.
The University of Vermont Medical Center and Central Vermont Medical Center came in at the board’s exact 0.72 percent price increase limit. Southwestern Vermont Medical Center in Bennington is requesting to increase prices by the board’s exact 2.85 percent price increase limit.
Two other hospitals are requesting price increases higher than what the board ordered in April.
Northwestern Medical Center in St. Albans wants to raise prices 6 percent despite being ordered to reduce prices 1.1 percent, and Northeastern Vermont Regional Hospital is seeking a 4.25 percent price increase, despite the board imposing a 3.2 percent cap in April.
The board says the weighted average commercial price increase proposals is 2.4 percent. In comparison, hospitals requested an average 2.2 percent commercial price increase last year, and received a 1.8 percent increase.
On the revenue side — which takes into account not just commercial insurance prices but Medicaid, Medicare, and how many services people use at hospitals — hospitals are seeking to raise the revenue they take in from patient care by 3.6 percent.
That number is slightly above the 3.4 percent that regulators said hospitals were allowed to increase their patient care revenue when they issued budget guidance in March, and more than twice the increase between fiscal year 2016 and the budgets for fiscal year 2017.
In dollars, the increase in patient care revenue over current projections for 2017 is $86.9 million.
Brattleboro Memorial Hospital, Copley Hospital in Morrisville, Northeastern Vermont Regional Hospital in St. Johnsbury, and Northwestern Medical Center in St. Albans are all above the revenue caps the board imposed in its budget guidance.
Despite keeping their price increases exactly at what regulators imposed in April, the UVM Medical Center, Central Vermont Medical Center and Southwestern Vermont Medical Center are all proposing to take in more revenue than the amount they would receive if they followed the March budget guidance.
Todd Keating, the chief financial officer for the UVM Health Network, said the revenue is going up faster than prices at the UVM Medical Center because the hospital’s inpatient departments have been busier than in previous years.
Keating said that could mean there are higher acuity patients who need to stay in the hospital for longer periods of time, or more patients walking in the door of the hospital in the first place.
However, he said the budget, which his team submitted before July 1, is already outdated. He said the UVM Medical Center and Central Vermont Medical Center would both see reductions in how much revenue they get from Medicaid in the next fiscal year, bringing the 3.5 percent revenue growth rate down.
Keating predicted that the patient revenue increase at the UVM Medical Center would be less than 3 percent.
“I’m feeling pretty good about this,” said Mike Del Trecco, the chief financial officer of the Vermont Association of Hospitals and Health Systems, which represents all 14 regulated hospitals.
He said that even though the proposed revenue increases are 3.6 percent instead of 3.4 percent, the growth rate “is really a sign of the hospitals and the delivery system moving in the right direction.”
“Hospital’s initiatives to control the price increases combined with some of the regulatory oversight is really a telling sign that we’re all sort of marching in this direction of being really careful and cautious of resources in health care,” Del Trecco said.
The UVM Medical Center, which takes in about half of the $2.5 billion in patient care revenue in the state’s whole hospital system, is asking the board to stop regulating it based on revenue from patient care.
Such a move would pivot how the Green Mountain Care Board has been regulating hospital budgets since the board came into existence in 2011. Regulatory predecessors to the board had similar processes.
“While (patient care revenues) tell a story about costs and cost growth, that story is limited,” the hospital wrote in a letter to the board. “It does not allow policymakers to easily distinguish, for example, between appropriate utilization and unnecessary utilization. It does not account for shifts in where care is obtained, or where patients are coming from.”
Instead, the hospital says the board should start regulating how much the hospital spends on the average patient per month — a figure that insurance companies use to analyze spending and set health care premiums.
As an example, the hospital wrote in its letter to the board that it spent an average of $477 per patient per month in 2014, versus an average of $482 per patient per month in 2016. That equals “only a 1 percent increase in the course of two years, compared to 9.5 percent in our total” patient care revenue.
The UVM Medical Center says it is requesting the change because the hospital’s subsidiary, OneCare Vermont — which is taking on duties similar to an insurance company — is starting to force the hospital accept lump-sum payments every month to take care of patients.
Keating said changing the regulatory indicators is part of moving from a health care system that reimburses hospitals for each individual procedure and toward a system that pays them lump sums, and therefore encouraging them to keep patients healthy.
“If we’re going to start going down that path we have to start changing the language around it,” Keating said. “If we continue to call everything … patient service revenue, we might as well go back to fee for service.”
Susan Barrett, the executive director of the Green Mountain Care Board, said the board would keep its budgeting protocols regarding patient care revenue for fiscal year 2018.
“Moving forward, we would take that (recommendation) into consideration, but that would be a board decision, a staff-informed board decision,” Barrett said.
The board will hold meetings across the state Aug. 15, 17, 22 and 24 to review hospital budgets before voting on final budgets Sept. 7 and issuing written decisions by Sept. 15.
Public comments can be submitted here.
