Two of the University of Vermont Health Network’s hospitals in upstate New York have posted millions of dollars of losses in the past few years, according to financial information provided by the network.
Champlain Valley Physicians Hospital and Alice Hyde Medical Center together account for about one-third of the beds that make up the network. They have lost more than $25 million since fiscal year 2013, the information shows.
Champlain Valley Physicians Hospital in Plattsburgh, New York, a 300-bed facility that joined the network in late 2013, lost $2.4 million in fiscal year 2015 and $7.9 million in fiscal year 2016, and is back in the black after having a weak first quarter in fiscal year 2017, the information shows.
Alice Hyde Medical Center in Malone, New York, a 76-bed facility that joined the network in 2016, lost $909,000 in fiscal year 2013, $466,000 in fiscal year 2014, $5.7 million in fiscal year 2015, $2.4 million in fiscal year 2016, and $6.4 million in fiscal year 2017, as of August, documents show.
CVPH’s losses are comparable to those faced by Porter Medical Center in Middlebury, shortly before it joined the UVM Health Network. Alice Hyde’s losses exceed the losses Porter Medical Center faced between fiscal years 2012 and 2016.
But the network says two Vermont hospitals in the network, the UVM Medical Center and Central Vermont Medical Center, which have been running surpluses for the past two years, are not propping up the New York hospitals.
Todd Keating, the chief financial officer for the UVM Health Network, said the network knew Alice Hyde would have financial trouble when the system acquired it, and that CVPH tended to have either great financial years or run huge deficits.
He said the network brought the two hospitals into the network knowing that the staff has the expertise to help improve each hospital’s finances. Both Alice Hyde and CVPH started showing better results this summer, he said.
The Vermont hospitals do not directly subsidize the New York hospitals, Keating said. While state regulators in New York and Vermont “do not want” the network transferring money to fill in deficits, he said, some financial arrangements between the hospitals have been approved.
“As you can imagine, when you’re a network that has business on both sides of that boundary, there’s going to be a normal course of transactions,” Keating said, but both sides were “very, very clear” that money from one state’s hospitals could not be used to prop up the hospitals in the other state.
“Every boat’s supposed to float on its own bottom,” Keating said of the network’s hospitals.
Networkwide management resources
Keating said the network is using management resources to help the two New York hospitals stay afloat.
The network maintains shared services such as information technology, finance, legal, planning and strategic resources. Any of the six hospitals in the network can use them as needed, he said, including Alice Hyde and CVPH.
Going forward, Keating said the network is now planning to leverage the UVM Medical Center’s high credit ratings into a networkwide line of credit to allow any of the network’s hospitals, including CVPH and Alice Hyde, to borrow at low interest rates.
At the UVM Medical Center, low cost loans have saved the hospital tens of millions of dollars, Keating said. The average interest rate on borrowed money at the flagship hospital is 3.8 percent — the lowest rate on a hospital debt portfolio that Keating said he has seen in his career.
With a network line of credit, CVPH and Alice Hyde can borrow at low interest rates to help fill in their large deficits, or refinance existing debt to lower their debt service payments.
“This is why we say there’s opportunity,” Keating said. “We looked at their debt when we were going to acquire them, and we knew that there would be opportunity for savings in those areas.”
Additionally, the network is setting up a group that will help all six hospitals recruit new doctors. “Just about every hospital in our system has some critical vacancies that need to be filled,” Keating said.
Vacancies are also contributing to some of CVPH’s challenges, he said. Having a networkwide recruitment group would allow doctors to apply to work for the network and be placed in the hospital that fits the doctor’s preferences, he said.
“We feel that if we implement all those things … we can get the (Alice Hyde) Medical Center up to an area where they can make around $2 million a year,” Keating said. He said progress already is apparent from changes made this past spring.
For example, Alice Hyde was losing $250,000 per month in the recent past and has reduced that loss to $125,000 a month because of the network’s guidance, Keating said. The network has also helped CVPH find operational savings through labor cuts, he said.
“There are no free rides in the system and stuff,” Keating said. “We will help them by bringing guidance and support to the entities. We don’t take assets from, let’s say Vermont to New York to float those entities in the short term.”
Outlook for expansion in New York
Keating said the UVM Health Network is one of the first out-of-state health networks to be permitted to operate New York hospitals, and the number permitted remains low out of fear that new networks will transfer money back and forth.
While the network has been growing rapidly since it began — and may add Vermont’s largest visiting nurse association to its ranks this year — Keating said he does not anticipate the network adding any more New York hospitals in the near future.
Keating said the network took on the three New York hospitals because they are right across the border from their Vermont counterparts, and New Yorkers tend to travel east across the Vermont border for their care.
CVPH is almost directly across Lake Champlain from the UVM Medical Center, he said, and the Elizabethtown Community Hospital is across the New York border from Porter Medical Center.
Alice Hyde is almost directly across the lake from Northwestern Medical Center, which is not part of the UVM Health Network but is part of OneCare Vermont, a health reform company co-owned by the UVM Medical Center.
“I would say right now we’re good where we are,” Keating said. “We don’t have anything going on with discussions anywhere, which is good because we’re really building the infrastructure to be more of a network.”
The network continues to seek regulatory approval in Vermont for a $112 million electronic medical records system that would put several of its hospitals onto the same software.
“This is as much about stabilizing the regional health care system as everything else, because small hospitals are struggling,” said Michael Carrese, the network’s spokesperson. “They’re struggling all over the country.”
CORRECTION: The UVM Health Network says state regulators in New York and Vermont do not want money going back and forth between hospitals in both states, but financial transfers are not prohibited.