State regulators denied an emergency request from Northwestern Medical Center to raise its rates for medical care by 15%.
The Green Mountain Care Board members voted unanimously Monday, saying that the hospital’s ask was poorly justified, and that such a large, immediate increase would unfairly burden health insurers — and ultimately, Vermonters.
“This request seems a little out of touch with the reality that’s facing Vermonters right now,” said board member Jessica Holmes.
In response to the denial, NMS spokesperson Jonathan Billings said the hospital would have to more aggressively cut services and staff. NMC has already begun offering voluntary layoffs, he said, and “operational reserves are declining at an alarming rate.”
Northwestern has lost money each of the past three years. While hospitals across the state have posted losses during Covid-19, the appeal from the St. Albans-based Northwestern was based on budgetary challenges from before the pandemic.
At the end of February, NMC administrators projected that the hospital would end the fiscal year with a $9.6 million loss. In March and April, the hospital has since lost “millions” of dollars, Billings said. If the Green Mountain Care Board had approved the 15% rate increase, it would have provided Northwestern $3.8 million between May 1 and the end of the fiscal year on Sept. 30. The hospital would still have ended the year in the red, but with a smaller shortfall of $5 million.
Northwestern’s director of finance Stephanie Breault presented the bleak picture of the hospital’s finances to the Green Mountain Care Board Wednesday. Installing a new electronic health record system had resulted in a loss of $7 million, as doctors saw fewer patients and had to be trained to use the technology.
High turnover had caused the hospital to hire more traveling nurses — which are about twice as costly as regular staff. The projected costs of traveling nurses in 2020 was $2 million, more than three times higher than last year.
The rate increase, which would mean that the hospital would receive 15% more on average for its medical procedures, would have been entirely funded by commercial insurance companies. Those costs would have been later passed on to Vermonters through their insurance premiums, Holmes said before the vote Monday.
She worried approval would set a dangerous precedent for other hospitals that come to the board mid-year for a bailout. “In my time on the board, I cannot remember ever allowing such a substantial rate increase, especially not mid-year and frankly, with so little documentation,” Holmes said.
Typically, hospitals will file for annual rate increases in July, as part of the regular budget processes. Even if the Care Board had given the hospital the rate increase, Northwestern would have had to negotiate with the insurance companies.
Last week, Northwestern Medical Center issued a 10-point sustainability plan, with changes that included increasing focus on telemedicine, making employee benefits and pay more competitive to retain staff, eliminating a program that helped discharged patients get groceries or transportation, reducing investment in the community wellness program RiseVT, and abandoning some renovation and construction plans.
The hospital also offered severance packages to any employee besides doctors and bedside nurses who agreed to a voluntary layoff. Additional staff cuts are also likely, according to Chief Financial Officer Robyn Alvis.
“We’re not relying on a rate increase to solve all of our issues,” Alvis told the Care Board. The hospital has already received about $2 million in CARES Act funding from the federal government, and is expecting more, Billings added.
Breault, the director of finance, called the requests “appropriate” and “reasonable” compared with rate increases provided to other Vermont hospitals.
Regulators weren’t convinced. Last week, Green Mountain Care Board members grilled Northwestern’s financial staff about their changing rationale around lost cash flow. They also asked why so much of the loss was due to the electronic health records, and how much loss was due to the hospital’s participation in the accountable care organization OneCare Vermont.
Holmes, and other board members, pushed the hospital to lay out other ways to cut costs. “I would really need to see that they’ve left no stone unturned,” she said.
“While I’m sympathetic [to the hospital], there are so many moving parts here that aren’t being addressed,” agreed board member Tom Pelham.
The financial situation only continued to worsen during Covid-19. Revenue was down 55% in April, according to presentations before the board last week.
But Billings said that a hardline approach from the board won’t solve the problem. “While Covid makes things worse, it’s not what was causing this, and waiting to address this in hopes of having Covid go away is not responsible,” he said. “We are not in an emergent financial situation at the moment, but we have to address these losses immediately.”
