[M]any Vermont hospitals continue to struggle financially, and a majority lost money on operations in fiscal year 2018, new statistics show.
A Green Mountain Care Board review of fiscal 2018 financial results for Vermont’s 14 medical hospitals also showed that, across the system, expenses are growing at a faster rate than revenues.
Not all hospitals performed poorly: University of Vermont Medical Center, the state’s largest hospital, posted a positive operating margin of $46 million.
But there were enough adverse results that care board Chair Kevin Mullin called the budget trends a “huge concern.” He cited widespread health care workforce shortages that are driving up costs and depressing revenues.
“Expenses have to be kept under control,” Mullin said. “But with that being said, if you get into what’s driving those expenses, it boils down to workforce, primarily. And I don’t think the hospitals are going to be able to solve the workforce problem on their own.”
The Green Mountain Care Board’s regulatory duties include two key interactions with hospital budgets: The board sets hospital revenue and the overall rate charged to insurers prior to the start of a fiscal year, then reviews hospitals’ performance after the fiscal year ends.
Revenues – which include proceeds from patient care as well as “fixed prospective payments” under the state’s all-payer reform project – are a key measurement for the care board. Hospitals where revenues deviate from their budget by more than 0.5 percent are subject to board review and potential action.
Last year, for example, the board ordered UVM Medical Center to set aside $21 million in excess revenue to increase mental health treatment capacity in Vermont.
The 2018 statistics show that only one hospital – UVM Medical Center – fell within the board’s 0.5 percent budget-variance parameter when the fiscal year ended. And that was only because the board adjusted the hospital’s base budget for fiscal 2018 to more accurately reflect actual revenues from the year before.
The general lack of close conformity with board-approved revenue plans “tells me that budgets are budgets, and there are going to be variances,” Mullin said. “And the variances went in both directions.”
“It gets back to looking at each hospital on an individual basis to try to be a fair regulator,” he added.
Wednesday was the board’s first look at hospitals’ performance in the fiscal year that ended Sept. 30, so there were no actions taken immediately. But documents show some clear trends emerging or continuing.
Statewide, a care board analysis showed that hospitals saw a 3.1 percent increase in revenues and fixed payments from fiscal 2017 to fiscal 2018. Hospitals reported a 1.1 percent increase in acute patient admissions and a 3.7 percent increase in outpatient visits in fiscal 2018.
But operating expenses grew by 5 percent, and care board officials noted a steady downward trend in hospitals’ operating margins in recent years: Margins have declined from a five-year high of 4.6 percent in fiscal 2015 to just 1.4 percent in fiscal 2018.
In fact, eight hospitals failed to make money on operations in fiscal 2018. While most of those facilities ended up in the black due to the addition of nonoperating revenue, some couldn’t salvage their bottom lines.
The two biggest operating losses came at hospitals that have been in the news for their financial struggles.
Springfield Hospital, which is cutting costs to deal with deficits and has been bailed out by the state, had a negative operating margin of 12.8 percent and lost nearly $7 million on operations in fiscal 2018.
The next-biggest percentage loss came at Gifford Medical Center in Randolph, which posted a negative margin of 10.7 percent and an operating loss of $5.37 million. Gifford has been struggling for several years and received a boost on Wednesday when the care board approved a budget modification allowing the hospital to charge insurers more in the current fiscal year.
The other hospitals that reported operating losses in fiscal 2018 included Brattleboro Memorial ($1.9 million, or 2.4 percent); Central Vermont ($7.87 million, or 3.8 percent); Copley ($2.2 million, or 3.3 percent); Grace Cottage ($556,530, or 2.9 percent); and Northwestern ($3.7 million, or 3.4 percent).
Care board officials said North Country Hospital’s budget data is considered preliminary and is subject to change. However, officials said the hospital has reported a 2.3 percent operating loss.
Six other hospitals reported positive operating margins in fiscal 2018. They were Mount Ascutney ($1 million, or 1.9 percent); Northeastern ($1.4 million, or 1.7 percent); Porter ($1.49 million, or 1.8 percent); Rutland Regional ($1.3 million, or 0.5 percent); Southwestern ($7.6 million, or 4.6 percent); and UVM Medical Center ($46.1 million, or 3.4 percent).
Jeff Tieman, president and chief executive officer of the Vermont Association of Hospitals and Health Systems, acknowledged that some hospitals are in “really challenging financial situations.”
“We also believe, especially here in Vermont, that they are facing pressures and making investments that challenge them to an even greater degree,” Tieman said. Those investments include financial support of the all-payer model and the state’s accountable care organization, OneCare Vermont.
Citing Gifford’s more than $1.4 million reduction in expenses between fiscal 2017 and fiscal 2018, Tieman said hospitals also are trying to control their costs.
“There’s a laser focus on expense management and reduction across our system, and also a deep commitment to health reform and moving to a value-based system,” Tieman said. “And we need the financial headroom to achieve that.”