Vermont’s 14 hospitals are asking the state to allow their patient revenues to grow at a higher rate than recommended by regulators.
If the Green Mountain Care Board, which regulates health care spending in Vermont, approves the budgets as submitted by hospitals this year, the medical centers would take in $118 million more in fiscal year 2020 than they expect to take in this year.
The budgets represent a 4.5% growth in revenue compared to budgets approved by the care board last year. The board asked hospitals to cap revenue growth at 3.5% in a March guidance.
Overall, the proposed budgets show hospitals across the state are expecting $2.73 billion in net patient revenue next year. Net patient revenue is gross receipts from patient care after expenses are subtracted.
The care board will review the budgets in coming weeks in a series of hearings across the state. They will make final budget decisions in September.
Most hospitals are asking the care board to approve budgets that include rate increases for consumers and insurers. The biggest hikes, by percentage, are coming from rural hospitals that are facing financial struggles and expecting losses this year. Six of the state’s 14 hospitals will have lost revenue by the end of the fiscal year.
Copley Hospital in Morrisville has asked to increase its rates by 9.8%, and Northwestern Medical Center in St. Albans has asked for a 6% increase. Copley expects to lose $1.2 million by the end of the fiscal year, and Northwestern says it will lose $4.7 million.
The average proposed rate increase across Vermont’s hospitals next year is 3.2%.
The care board gave hospitals a 3.5% growth rate guidance this year — up from 3.2% last year — to help them retain employees by boosting wages.
Kevin Mullin, the chair of the Green Mountain Care Board, said that in weighing budgets, the panel has to balance improving access and quality of care at hospitals with affordability.
“Certainly any time that you allow hospitals to grow faster than the economy grows, it puts that pressure on the affordability because somebody’s paying for that growth in revenue,” he said.
At the same time, the board understands that hospitals are facing financial strain.
“These are especially trying times for the hospitals because of inflationary pressures on wages,” Mullin said. “You can’t suppress wages and think that you’re going to keep providers in the state of Vermont.”
Struggling small hospitals
This year’s round of hospital budgeting comes as many rural hospitals in Vermont, like Copley and Northwestern, continue to face financial struggles.
Jill Berry Bowen, Northwestern’s CEO, said that the medical center’s transition to an all-payer health care system has decreased profits.
As the hospital has invested in more primary and outpatient care doctors it has also seen a decline in emergency room and inpatient visits — which has meant less revenue, Bowen said.
“I see what’s happening and it’s certainly a big lift for small community hospitals,” she said. “We’re trying to be proactive and lead the future and with that comes a lot of change.”
Bowen said that since 2016 when the medical center saw an 8% rate cut, its revenue has been “capped at rates below medical inflation.”
“We want to get back to a modest bottom line that is better than break-even,” Bowen said, explaining the hospital’s proposed rate increase.
Mt. Ascutney Hospital and Health Center also reported that some of its losses stemmed from transition to the all-payer model. The hospital, which expects a $400,000 deficit this year, attributes much of its loss to its contracts with Vermont’s accountable care organization, OneCare Vermont.
Under those contracts, the hospital receives fixed payments to care for a group of Medicare and Medicaid patients and to maintain reserves if the cost of their care is higher than projected.
The increased reserve costs have put a strain on the hospital, the Valley News reported this week.
Copley Hospital’s report to the Green Mountain Care Board said that the medical leave of a prominent orthopedic surgeon, higher drug prices, and “significant expense pressure related to unfavorable health insurance claims,” are leading to its estimated $1.2 million loss.
Grace Cottage Hospital in Townshend is expecting a $1.1 million deficit by the end of the fiscal year. Its CFO, Stephen Brown, said that it has struggled because of low Medicaid reimbursements.
In the last fiscal year, Brown said the hospital billed Medicaid $4 million for services, but only received $1.4 million.
Grace Cottage is asking the care board to approve a 9% increase in patient revenue next year, the largest of any hospital.
Brown said the majority of the increase won’t come from its 3% proposed consumer rate hike, but from new revenue the hospital is expecting from increased demand on its primary care doctors.
He said many in Windham County have started to rely on primary care physicians at the hospital, as they’ve become harder to find in the region.
“We’re not adding any new services, adding anything high cost,” he said. “It’s just simply taking care of the patients that are looking to be taken care of in our area.”
Springfield Hospital, which recently filed for bankruptcy as it tries to restructure about $20 million in debt, expects to see 20% less patient revenue in the next fiscal year.
The hospital expects to lose $6.5 million by the end of the year. To stave off further losses, administrators closed the childbirth unit and reduced staff in the psychiatric unit, according to a budget report submitted to the care board.
In the report, the hospital stated that “difficult payer mix, challenging demographics, economic outlook, the comparatively poor health status of our residents and the ever increasing social challenges (Poverty, low educational attainment, drug use, crime, etc.),” have presented challenges in the current fiscal year.
Not all of Vermont’s hospitals expect to end the fiscal year with deficits. The University of Vermont Medical Center, the state’s largest and most profitable hospital, is projecting to end the year with a surplus of $40 million.
Even so, the Burlington hospital has asked the care board to increase the ceiling for patient revenues by 6.6% in the next fiscal year.
Annie Mackin, a spokesperson for the hospital, says that the majority of the revenue boost can be attributed to an increase in patients with higher needs.
“4.1% of our budgeted increase for FY2020 comes from the fact that we are treating more patients, and those patients are older and sicker, and often tend to use or require more health care services, thus resulting in higher patient revenue and expenses to care for the population,” Mackin said.
UVM is also asking for a 3% rate increase, which is slightly below the 3.2% average proposed by hospitals this year.
While it expects it will run up a deficit of $400,000 by the end of fiscal year 2019, Gifford Hospital in Randolph told the care board that in 2020 it will see a profit for the first time in three years.
CEO Dan Bennett said that in recent years Gifford’s struggle to fill vacant positions at the hospital has led to increased costs. The hospital has had to hire temporary staff to fill some primary care and surgeon positions, which costs more than hiring full-time replacements.
But Bennett said that the hospital has started to hire permanent doctors.
“We’ve started to build back those services, been able to provide the more traditional levels of volumes that we have in prior years and we’re starting to see that rebound,” he said.
It has asked the care board to approve a 5% rate increase next year that Bennett says will help right the hospital’s finances.
“This year that’s the rate increase we need in order to fulfill our obligations, to be able to maintain competitive salaries and benefits for our staff and to be able to have the equipment and facilities we need to be able to provide care for our communities,” he said.