[W]hen Art Nichols joined the Brattleboro Retreat as chief financial officer last year, one big question troubled him: How could a hospital that’s so busy be losing money?
The root of the problem, Retreat administrators decided, was the amount of Medicaid money the hospital had been receiving from the state.
The solution, reached after negotiation between Vermont officials and the Retreat, is a boost in Medicaid rates that took effect July 1. The increased rates for both child and adult inpatient psychiatric care will equal a projected $3.5 million in additional payments to the Retreat over a 12-month period.
The deal underscores the fact that the Retreat “is a key strategic partner in helping Vermonters who need mental health services,” said Michael Costa, deputy commissioner of the Department of Vermont Health Access.
“These recent rate changes are designed to make sure that they can keep their doors open and serve Vermonters while simultaneously preparing to make investments for the future,” Costa said.
There are two primary factors behind the Retreat’s request for a rate hike.
One is the way in which the psychiatric and addiction-treatment hospital makes money. Nichols said the Retreat can’t rely on ancillary and outpatient services to provide substantial revenue.
“You’re just about completely dependent on your inpatient daily rates to be able to balance your financial equation,” he said.
Also, the makeup of that inpatient population has changed over the years.
The Retreat took on many acute mental health patients after Tropical Storm Irene closed the Vermont State Hospital in 2011. The Retreat in 2013 opened a new, 14-bed adult inpatient unit designed for those patients.
The hospital also is partnering with the state to develop at least 12 new inpatient psychiatric beds as part of a push to increase Vermont’s overall mental health treatment capacity.
In a comment sent to the state in late June during Medicaid rate negotiations, Retreat President and Chief Executive Officer Louis Josephson noted the development of those beds as well as the hospital’s shifting payment mix.
“The Retreat has seen the state’s Medicaid population become the predominant group on each of its inpatient units,” Josephson wrote. “At any given time, 50 percent of the Retreat’s inpatient revenues come from the state Medicaid system.”
The problem, administrators said, is that Medicaid rates haven’t been keeping pace with the Retreat’s costs. The Retreat posted a small positive operating margin in 2015 but lost $590,000 in 2016 and $2.9 million in 2017.
Costa said Retreat administrators “indicated to us that, without a rate adjustment, they would not be on a sustainable path, and they would be at severe financial risk in the future.”
“We want to be good partners and help people before there’s a Brattleboro Retreat crisis that would exacerbate the present mental health crisis,” he added.
The result is a Department of Vermont Health Access decision to raise both the child and adult inpatient psychiatric Medicaid rates to $1,425 per day for the Retreat. Previously, those rates had been $1,128 for adults and $1,224 for children.
The department initially proposed a smaller rate hike but agreed to a larger increase after hearing from the Retreat and reviewing the hospital’s financials.
“The state believes that this (new) level of reimbursement would create conditions where the Retreat can maintain existing capacity, pursue plans for the additional 12 Level 1 inpatient beds and establish a sound financial foundation to accomplish both these goals,” state officials wrote.
Though Medicaid is a mix of state and federal dollars, Costa said Vermont officials have authority to make such adjustments among health care facilities as needed.
“Medicaid is really focused on providing access for its members,” he said. “As part of our routine course of business, we always evaluate the appropriateness of our rates. That’s true for the Retreat, and it’s true for many other health care providers.”
State officials also noted that the Retreat has agreed to improve its Medicaid-billing practices. A long-running state attorney general’s investigation of those practices recently concluded that the Retreat did not engage in criminal misconduct but needs to correct “several areas of billing deficiencies.”
The state and the Retreat entered into a memorandum of understanding that mandates an independent, third-party review of the hospital’s billing. The agreement also calls for the Retreat to meet “compliance obligations” including decreasing the hospital’s Medicaid-claims error rate; filing timely claims; and ensuring that all claims are properly prioritized.
Additionally, the memorandum orders an annual meeting between the state and the Retreat “to review and discuss possible increases to Medicaid reimbursement rates.”
Costa said that’s evidence of the two parties’ commitment to “being productive partners going forward.”
“I think both parties will use that (memorandum) to make sure we’re on the same page month by month going into the future,” Costa said. “We are committed to protecting both the most vulnerable Vermonters who need mental health services and taxpayers, and we’ll keep working with the Retreat to do that.”
Nichols commended state officials for taking time to “understand our situation,” including the Retreat’s expanding treatment partnership with the state.
He cautioned, however, that the rate hike shouldn’t be seen as a windfall.
“It’s something that is really trying to make up for the past three or four years,” Nichols said. “It’s just something that’s going to put us back on an even keel.”
