[T]wo small Vermont hospitals are hoping 2019 will be a bounce-back year.
Gifford Medical Center in Randolph and Copley Hospital in Morrisville each are projecting multimillion-dollar operating losses in the current fiscal year, which ends Sept. 30.
Administrators at the hospitals said staffing shortages and decreased patient numbers are among the primary reasons for those losses. But they also believe a combination of new doctors, cost-cutting and rate hikes will get them back in the black in fiscal 2019.
The contrast between this year and next is most stark at Gifford, where officials are projecting a more than $6 million swing in the hospital’s bottom line. Dan Bennett, the hospital’s president and chief executive officer, said the shift is realistic.
“We’re not looking at shooting the moon here,” Bennett said. “We’re looking at getting back to historical levels and meeting the needs that exist in our communities. We don’t think that is risky in terms of what we’re predicting, now that we have the people in place.”
Administrators from both Gifford and Copley presented their fiscal 2019 budgets this week to the Green Mountain Care Board, Vermont’s health care oversight body, which is holding a series of public hearings on proposed hospital budgets.
Copley and Gifford had similar stories to tell the care board: Each posted substantial operating surpluses in fiscal 2015 but have had mixed results thereafter.
And each has had a rough fiscal 2018. Gifford had budgeted for positive operating income of $1.37 million but is now projecting a $6.29 million loss, while Copley had budgeted for a small operating surplus but is expecting to end up with a $2.21 million loss.
In both cases, nonoperating revenue will ease some of that blow. But it won’t get either hospital out of the red in the current fiscal year.
For both hospitals, staffing has been a problem. Bennett cited Gifford’s recent physician vacancies in general surgery, orthopedics and primary care.
“In the last two years in particular, this has impacted our volume of services we’ve been able to provide at Gifford Medical Center and also our revenue,” he said.
To a lesser extent, Bennett said the recent implementation of a new electronic medical record system – and related staff training and adjustment – also has hampered Gifford. But he said the biggest stressor is staffing.
“Our small size can result in greater volatility when we have staffing shortages or vacancies in provider positions,” Bennett said.
The story is similar at Copley. In a budget narrative submitted to the care board, administrators wrote that the hospital “has seen a significant and unforeseen change in its (patient) utilization.”
“Currently, Copley’s utilization is well below budget, which will result in a significant financial loss and the third year in a row of generating a loss from operations,” the narrative says.
Like Gifford, Copley leaders have felt the pressure of having to hire temporary nurses and doctors to cover vacancies and fill schedules. Rassoul Rangaviz, Copley’s chief financial officer, said the hospital has been exceeding its budget for “traveler” nurses by 50 to 70 percent.
Art Mathisen, Copley’s chief executive officer, commended the dedication of Don Dupuis, who’s been the hospital’s sole general surgeon.
But “if you’re looking just from the business side at costs, it actually costs a great deal more money to have a temporary surgeon allow Don to take a few days off every month,” Mathisen said. “It’s an incredible amount of money, and that money really is a challenge for our hospital.”
Both hospitals, however, are expecting much better results in fiscal 2019 in part due to the addition of new staff.
Copley has hired a second general surgeon. At Gifford, Bennett said two new surgeons started last week and “are already going strong.”
Also, “we have four new primary care providers who will be starting between the first of September and the first of November,” Bennett said. “And we’ve had some success in filling some vacant (staff) positions in our operating room.”
Those hires should boost utilization while decreasing reliance on expensive temporary help, administrators at both hospitals said. But manpower isn’t the only driver behind their hope for a more positive 2019.
They also cited extensive cost-cutting efforts. Gifford submitted a long list of expense reductions totaling almost $1 million in the current fiscal year, and administrators expect the hospital’s overall expenses to drop by $2.9 million in 2019 compared with the current fiscal year.
Rangaviz said Copley is targeting nearly $3 million in “cost containment” and is more than halfway there.
There’s one other reason the hospitals’ proposed fiscal 2019 budgets are in the black: Both are seeking increases in the rates they charge insurers.
Gifford’s requested rate hike is 4 percent, from which the hospital expects $1.6 million boost in net patient revenues in 2019. That’s the same rate increase the care board approved last year.
Copley wants a much bigger change, requesting a 7.9 percent increase. That’s the largest rate hike requested by any Vermont hospital for next fiscal year, and it would generate $3.1 million for the hospital.
Copley administrators said the rate increase would boost patient revenues and would help the hospital “achieve a positive operating margin for the first time since fiscal year 2015.” And Rangaviz noted that Copley’s rates have decreased in each of the past three years.
The bottom line in each hospital’s proposed fiscal 2019 budget is significantly improved. Gifford is budgeting for $2.27 million in revenues over expenses, and Copley is looking to essentially “flip” its projected $1.8 million loss in the current fiscal year to a $1.8 million surplus next year.
Care board members questioned both hospitals about those numbers. In particular, board member Tom Pelham sounded skeptical of Gifford’s expectations for a dramatic turnaround.
“That just seems like an extraordinary task, and the more extraordinary the task becomes, the higher the risk becomes,” Pelham said.
The board will rule on hospitals’ fiscal 2019 budgets in September.