[F]or those who are concerned about the continued growth of health care costs, Vermont hospitals’ proposed fiscal year 2019 budgets are a mixed bag.
On one hand, the overall increase in patient revenues expected by the state’s hospitals is just 2.9 percent – lower than a target set by the cost-conscious Green Mountain Care Board a few months ago.
But that picture changes when considering individual budget submissions. Nine of Vermont’s 14 hospitals say they expect to exceed the board’s revenue targets – some by significant amounts.
Care board officials will be digging deeper into those numbers over the next few months. The board is expected to make decisions about hospital budgets in mid-September.
“Certainly, it jumps out at you and it raises eyebrows,” board Chair Kevin Mullin said of the hospitals’ revenue projections. “Those are the questions we will have.”
The care board annually reviews hospitals’ financial performance for the prior fiscal year and also approves budgets for the coming fiscal year, which in this case begins Oct. 1. That review process is just beginning for fiscal 2019, and officials warned that budget numbers are not yet final and could change.
For example, University of Vermont Health Network is using projected revenue growth rates for three hospitals – UVM Medical Center, Central Vermont Medical Center and Porter Hospital – that are lower than the care board’s numbers.
The health network says that’s due to a necessary accounting adjustment related to the new all-payer model of reimbursement. But care board officials have not yet accepted that change and are using higher revenue numbers for those hospitals, said Pat Jones, the board’s director of health system finances.
For that reason and several others, Jones said care board members should review fiscal 2019 hospital budget reports “with quite a bit of caution” pending further review.
However, there are some clear themes that emerge from those reports.
Overall, the state’s hospitals are expecting $2.61 billion in net patient revenue – the amount of revenue a hospital receives from patient care before expenses are figured in.
The fiscal 2019 figure represents an increase of $73.6 million over net patient revenues budgeted for the current fiscal year. That’s a 2.9 percent increase, which is below the 3.2 percent growth target https://vtdigger.org/2018/03/28/regulators-tell-hospitals-reduce-spending-growth/
in late March.
But that number is misleading.
The big reason is that UVM Medical Center, which dwarfs all other Vermont hospitals, accounts for almost half of the state’s net patient revenues. And UVM is proposing only a 1.7 percent hike in patient revenues for fiscal 2019, which artificially drives down the hospitals’ collective budget numbers.
Board member Maureen Usifer pointed out that, if UVM Medical Center is taken out of the mix, the revenue growth rate for all other hospitals would be 4.1 percent – significantly above the care board’s target.
According to the care board’s calculations, the biggest projected increases in net patient revenue are at Brattleboro Memorial Hospital and Central Vermont Medical Center – both at 6.5 percent. Seven other hospitals exceeded the board’s revenue-growth target for next fiscal year – Copley, Grace Cottage, Mt. Ascutney, Northeastern Vermont, Northwestern, Porter and Southwestern.
Five hospitals were at or below the board’s target. In addition to UVM Medical Center, they are Gifford, North Country, Rutland Regional and Springfield.
Gifford is at the lowest end of that spectrum, projecting a 6.1 percent decrease in net patient revenues when compared to the current year’s budget. Gifford administrators have said surgical and primary care vacancies contributed to a financial downturn, but they’re expecting the hospital to rebound.
Care board members also examined hospitals’ requested rates – that is, the prices that health care providers charge patients and insurers.
Like net patient revenues, the fiscal 2019 hospital rate proposals are subject to multiple interpretations. Hospitals are asking for a 3.1 percent rate hike, which is higher than the average request for the past few years.
However, Jones noted that eight hospitals proposed rate hikes that were lower than those approved by the care board for the current fiscal year. And she produced a chart showing a general decline in hospital rate increases since 2002.
“We have seen declines in both the submitted rates and the approved rates over time,” Jones said. “In fact, the last three years represent the lowest increases in the past 18 years.”
Jones also pointed out that hospitals don’t recoup 100 percent of the prices they charge. Just because rates are going up, “we should not assume it will translate directly into revenues,” she said.
The care board will take such factors into account when deliberating over hospital budgets for the next few months.
The board has set a schedule for hospital budget hearings next month in Montpelier, Burlington and Castleton. Each hearing includes testimony from hospital administrators and time for public comment.
Detailed budget submissions for each hospital are available on the care board’s fiscal 2019 budget-review web page.
Mullin said the board’s decision-making process on hospital budgets and rates is “not easy.”
“It’s a very fine line that you walk,” he said. “Because the last thing any board member would ever want to see under their watch is the closure of a hospital. But you also have to be very careful that you’re not rewarding a hospital for the fact they may be doing things that they’re not financially able to do given the demographics of an area.”