State regulators Wednesday signed off on a $1.35 billion 2020 budget for the University of Vermont Medical Center, an increase of about $75 million over the spending approved last year, exceeding the state’s guidance to cap increases at 3.5%.
The Green Mountain Care Board voted Wednesday to allow UVMMC, the state’s largest hospital, to increase the revenue it takes in from patients by 5.9% next year, and hike its rates for patients with commercial insurance by an average of 3.5%.
The budget growth the hospital will see next year is higher than the 3.5% revenue increase cap the board recommended in a guidance this spring.
The health care board finalized its decisions on 2020 hospital spending this week. It approved the budget growth at UVMMC after officials there reported an increase of patients from around the state who are increasingly older, and have more serious conditions.
Board members said Thursday that they shared the view that additional growth in the hospital’s revenue was needed to account for the increased demand it is seeing.
“I don’t think that we want UVM to turn away patients,” Jessica Holmes, a member of the board, said on Wednesday. “I don’t think that they will, and I think that the patients are coming.”
During their budget presentation to the care board last month, UVMMC officials pointed to data showing that the number of patients seen by the hospital went up from about 247,000 to about 252,000 between 2016 and 2018, and only continues to increase.
Officials said that the new patients are generally older, on Medicare, and coming from counties all around the state.
At the August hearing, Dr. John Brumsted, the CEO of UVM Health Network, told the board that capping the hospital’s revenue growth at the panel’s guidance level would mean denying care to patients.
“The only way to stay within those net patient revenue caps is to limit the number of patients that we provide access to services,” Brumsted said. “And we just can’t and won’t do that, it’s antithetical to our mission.”
In its budget request, UVMMC had asked regulators to approve a 4% rate increase for patients with commercial insurance, saying the increase was needed to offset the costs of inflation in the health care industry. Last year, the hospital received a 2.5% commercial rate increase, and the year before it received a 0.7% hike.
But Tom Pelham, the only member of the care board to vote against the medical center’s budget Wednesday, pushed to lower the rate increase, arguing that the hospital, which has seen the strongest financial performance in the state, can afford to rein in costs for consumers.
Pelham said he would have liked to see the rate increase as low as 1%. He pointed to data showing that between 2014 and 2018, UVMMC accounted for 80% (or $316 million) of the $393 million in revenue all hospitals in Vermont made above their expenses.
He also said that UVMMC has a larger share of payers with commercial insurance, compared to other Vermont hospitals. About 60% of its patients have commercial insurance, which reimburses for services at a much higher rate than Medicaid and Medicare.
Many of the state’s rural hospitals have far fewer patients with private insurance, exacerbating rural demographic trends already squeezing their finances. At Springfield Hospital, which filed for bankruptcy earlier this year, the majority of the medical center’s revenues come from Medicaid and Medicare reimbursements.
“Relative to smaller hospitals they have the wind at their back,” Pelham said of UVMMC following the hearing. “They have a great payer mix, they have a wealthier demographic … and the commercial rate comes out of the pockets of Vermonters.”
Board members decided to lower the proposed commercial rate from 4% to 3.5%, but the majority said that the hospital needed the increase to maintain financial stability.
UVMMC also has the highest executive pay among hospitals in the state, by far. Brumsted, the CEO, makes in excess of $2.1 million a year, equal to the pay of about 29 nurses — a fact wielded by nurses during a prolonged contract dispute last year.
While the hospital has consistently seen its revenues come in above its expenses, its operating margin has fallen in recent years. In 2016, the hospital had a 6.1% operating margin while its proposed 2020 budget only has a 3.2% margin.
Hospital officials have said they are concerned by the falling margin, and the possibility that ratings agencies may soon drop the medical center’s bond rating, which was upgraded from A- to A in January last year.
Those concerns were shared by some board members.
“Im worried about reducing their operating margin,” Holmes said. “I don’t want to compromise their ability to hire staff during this workforce shortage, I don’t want to compromise their ability to get the lowest possible borrowing rate,” which requires a high bond rating.
Kevin Mullin, the chair of the board, said that as the hospital is taking on more patients from around the state, he didn’t want to constrain its ability to care for those patients by lowering its revenue growth any further.
“The last thing that we want to do is doing something that would limit access to quality care,” Mullin said.
“You can meet your numbers by not doing things, and not hiring a specialist in a field,” he added. “And then it means that somebody doesn’t get access to see that person that they need to see.”
