The University of Vermont Health Network reported $10 million in financial losses in the last three months of 2019, surprising regulators and possibly causing a loss for the year.
The network, which includes six hospitals in Vermont and New York, blamed the shortfall on additional expense for its new health records system, Epic, and on the unexpected closure of operating rooms at its Fanny Allen facility.
In a news release Thursday, UVM leadership painted the UVM Health Network as a victim of the financial challenges plaguing hospitals across the nation.
“Challenges loom large for rural health care systems like ours and that is why we have come together as a health network,” said CEO John Brumsted in the release. There remained “a good deal of work ahead to shore up” the finances of the organization, he said.
The numbers were a result of the first quarter of its 2020 fiscal year, which began in October 2019. The reporting may cause the network to post a negative operating margin for the entire year as well, Brumsted said.
Only two of the network’s six hospitals ended the period with more revenue than expenses. The flagship hospital UVM Medical Center and New York-based Elizabethtown Community Hospital ended the period in the black. The other four — Central Vermont Medical Center in Berlin, Porter Medical Center in Middlebury, Champlain Valley Physicians Hospital in Plattsburgh, and Alice Hyde Medical Center in Malone — all lost money over the three months.
The announcement, however, comes after years of hefty operating margins. Between 2015 and 2018, UVM Medical Center took in $264 million more than it spent, Vermont health care regulator Tom Pelham told VTDigger last year. That’s an operating margin of 5.6% of the hospital’s total revenue.
For fiscal year 2019, which ended September, UVM Health Network budgeted an operating margin of $46 million, about 2.1%, according to Brumsted. The margin was ultimately $21 million, or 0.9%.
Meanwhile, hospitals around the state have been struggling; seven of the state’s 14 hospitals lost money in 2018, with a combined $28.6 million in operating losses.
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But UVM Medical Center, as well as its health network have hit what Brumsted termed some “bumps in the road.” In November, the network launched a $151 million project to install a new electronic health records system, Epic. That project cost more than expected, according to Brumsted. It also took longer than anticipated for doctors to adjust, decreasing productivity.
In October, UVM Medical Center closed its Fanny Allen operating rooms, after a strange smell left staff members sick. Operating rooms were reopened in January, but only after the medical center was forced to reschedule hundreds of surgeries. That also contributed to lower-than-expected revenue, Brumsted said.
The numbers came as a surprise to regulators. “Our eyebrows were raised when we saw their reporting,” said Kevin Mullin, chair of the regulatory Green Mountain Care Board, of the $10 million figure.
But he said he wasn’t worried about UVM’s future.
“It’s just one quarter, this is an institution that’s solid,” he said. “They’re proactively dealing with the problem. We’re not at the point where anyone here is panicked.”
To address the challenges, Brumsted said the health network would decrease spending on infrastructure projects, by waiting to spruce up a hospital entryway or postponing the purchase of new medical monitors, he said. The affiliated hospitals also try to save money by buying prescription drugs and medical equipment as a network.
Brumsted said he made the public announcement in the name of transparency and emphasized his confidence in the leadership of UVM Health Network to right the ship.
“I think it’s important to know that we want to be very transparent with our employees, our patients and communities to know that we are experiencing financial challenges,” he said. But, he added, equally important is the message that “we have really really good experienced people focused on the right initiatives and strategies, and that we’re going to get back on track.”
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