Health Care

University of Vermont Health Network announces $10M first quarter loss

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. 

Dr. John Brumsted, CEO of UVM Health Network, center, and Dr. Stephen Leffler, interim president at UVM Medical Center, during an interview in November. Photo by Glenn Russell/VTDigger

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. 

The University of Vermont Medical Center’s Fanny Allen campus in Colchester on Tuesday, October 22, 2019. Photo by Glenn Russell/VTDigger

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. 

Kevin Mullin
Kevin Mullin, chair of the Green Mountain Care Board, at a meeting in April. Photo by Glenn Russell/VTDigger

“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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Vic Noble

I am sure salaries had nothing to do with it…

Louis Meyers, M.D.

EPIC is one of the most expensive EMR’s in the country. UVM Health Network went for the cadillac.
There is also no mention of Al Gobeille, who was hired to increase efficiencies across the system. Is UVM trying to hide Mr. Gobeille and his $675,000 salary?

Ken Edwards

Who’s running the show there? It sounds as if it’s being managed by the state or former state “leaders”? What is being done to trim the fat? Maybe they need their own PIVOT committee.

Tom Wheaton

Wow! Where is the bottom here folks…my goodness this is scary

Ron Jacobs

Not a word about the ridiculous sums the executives take home.

Thomas Joseph

Executive compensation is excessive and fueling operating deficits.

Joy Munro

Is this a side effect of the demographics cliff? Too many elderly/sick in our state, not enough young with healthy reimbursement rates for care.

Gary Murdock

Health care delivery is so much better and more affordable now that its run by the progressive state.

G. Richard Dundas, MD

The response to a deficit is usually to jack up the charges for care.

Peter Chick

Chanel 3 says 15 million

Marie Parker

Don’t worry UVMMC, the GMCB will help bail you out.

Don White

Mullen’s cavalier comments are disturbing. His failed leadership has continually led to hospitals going out of business and rate payers getting screwed on premiums. “strange smell” thats the explanation of why a hospital closed its surgical wing? Perhaps the “strange smell is the hug pile of BS that this whole ripoff is.

john barrows

The administration is preparing up for another large rate increase for next year.
Quote from Digger article last fall “the $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%.”

Bob Zeliff

Looking at this report objectively, I am relatively happy with what I’m seeing.
– Brumsted and UVMHN is showing better transparency …a good thing.
-7 of 14 hosiptal are showing positive and 7/14 a losess.. sounds like our GMCB is doing finance regulation about right. All budget surpluses would be a warning of charging too much.
– I believe the UVMHN yearly budget is about $5B so $10m in a $1.25B quarter is a little over 1% loss..not worrying at all and should be correctable
– I’m more concerned about UVM Health and Hospice 24% problem ($1.6m great chart by the way ..thanks) and Porter’s 8% problem. Clearly some action should be looked for in these areas.

Jason Pare

Kevin Mullin is way over his head. If we could only foreshadow the fact that cronyism and the good old boy network of hiring practices would lead to this?? We clean out an entire division of government when bad practices happen in the prisons, but no one mentions cleaning house here when they lose 10 million in a quarter? Why doesn’t the SA and the legislature have the same passion here?

Peter Chick

Do I hear 20 million?

Dorothy Bolduc

I strongly suspect that the reason rural hospitals are failing is because the patients can’t afford the care. The Vermont Legislature, The Green Mountain Care Board, The health insurance companies have cost shifted people’s ability to pay to the end. Our state government doesn’t have the ability to pay either. Health care costs have gobbled up too much of the economic pie and the people do not have more to give.

John Zampieri

Here is a suggestion…for the hospital network to get lean and mean in their operating costs ….the people in the top 20 management positions should take a 10 percent pay cut…..this will help to reduce costs!! Start with the President . Also they should eliminate 20 percent of the top management team positions . Remember Brumsted is making over $2 million annual !!! Where is the board of directors in this.???

Matt Musgrave

Hmm. I wonder if throwing people off the health plans they liked into high deductible plans has anything to do with this? People with deductibles are paying ridiculous premiums then forced to decide between food or going to the DR. When the only people who are going to the DR do not pay for anything you will have revenue loss.

 

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