Health Care

Vermont hospital spending outpaces economic growth for 2nd year in a row

On the heels of approving a major increase in hospital budgets for fiscal year 2022, the chair of the Vermont’s health care regulatory board said executives should expect cutbacks in future budget cycles. 

The Green Mountain Care Board oversees health care costs and has set a cap for annual increases at 3.5%, in line with the state's economic growth. In the past several budget cycles, the board has allowed Vermont’s 14 hospitals to exceed that figure due to pandemic-related pressures. 

That approach has run its course, said board chair Kevin Mullin. For the past two years the board has given hospitals leeway to get their finances back on track, “but this is not something that’s going to keep happening,” Mullin said. 

Hospitals requested a median 6.1% growth rate for the current budget cycle. The board reduced that figure to 5.86% during its recent fiscal year 2022 deliberations. By comparison, the average growth rate in the five budget cycles before the pandemic was 3.3%. The new fiscal year starts Oct. 1.

Individual hospital rates varied significantly.

At a 13.4% rate, Copley Hospital in Morrisville proposed the highest rate hike over last year’s budget. The board cut that target to 12.4%. Leaders at Springfield Hospital initially asked for a 7.8% increase. The board ultimately rejected that request and set Springfield’s rate to zero. 

The board also trimmed $10 million from prices individual hospitals can charge Vermonters who are either self-insured or receive insurance coverage through small employers. The insurance charges, which total $66 million in final hospital budgets, are small compared with revenue from other private insurance plans. But for Vermonters in the employer insurance group, the reductions could represent significant savings. 

Mullin acknowledged that it’s been difficult to straddle the line between raising costs enough to support hospitals and making it unaffordable for Vermonters to see a doctor. The board erred on the side of hospitals the past couple of years, he said, and it’s about time to reverse that trend. 

Several hospital administrators openly disagreed with that assessment. 

John Brumsted, president and CEO of the University of Vermont Health Network, said in a statement Monday the network’s three hospitals need all the resources they can get “to meet the needs of our communities and to make real progress on improving access to necessary service.”

He wrote that the board’s cuts would make it “even more difficult to accomplish those goals.”

In a recent interview, Brumsted did not respond to questions about a more than $140 million payout the network received from state and federal agencies to cover Covid costs — nor did he address a network-wide reserve of almost $66 million in FY2020, according to an audited budget statement from that year. Despite all of the difficulties in 2021 at the network's flagship hospital, the University of Vermont Medical Center in Burlington — a cyberattack, the closing of an outpatient surgery center, staffing shortages and the pandemic — the network is poised to end the year in the black.

UVM Health Network’s three Vermont hospitals — UVM Medical Center, Central Vermont Medical Center in Barre and Porter Medical Center in Middlebury — are slated to net a collective $1.8 billion in revenue from patients in FY 2022, making up roughly two-thirds of healthcare spending in Vermont. With roughly 700 beds in Vermont, the network, which also has three hospitals in New York, is the largest provider in the region.

The board was conservative in estimating growth in Brattleboro Memorial Hospital’s FY2022 budget, based on current patient traffic. The hospital asked for a 3% increase over last year’s budget, but the board reduced that request to 0.3%. Steven R. Gordon, president and CEO of the 61-bed hospital in southern Vermont, asked the board to reconsider the decision. 

In a Sept. 10 appeal to the board, Gordon said the decision was “shortsighted” given that a growing number of patients sought care there during the spring and summer, a trend he said was expected to continue. 

The board rejected Brattleboro's appeal on Wednesday. Representatives from the Windham County hospital were not immediately available for comment.

Mullin said on Wednesday that hospital executives could return for a mid-year readjustment if patient volumes continued to grow next year. He explained that the growth targets determine a hospital’s expenses for a given year. A missed growth target one year, he added, could lead to losses that put a hospital system’s longevity at risk.

He pointed to Springfield Hospital, Vermont’s only hospital to file for bankruptcy in FY2020. The Windsor County hospital ran a deficit for years before the pandemic and entered this year’s budget season with less than a month’s reserve for hospital operations. The Green Mountain Care Board voted to keep the hospital’s 2022 growth target level, a move that CEO Robert Adcock said would decrease its reserve to 11 days. 

Adcock said in an email Wednesday evening that the hospital was awaiting the final written decision from the Green Mountain Care Board. In the meantime, the hospital has been considering affiliating with a larger network as a viable solution to the financial hardship. The hospital’s administration has already taken some steps in that direction, adding board representatives from two large regional players — Dartmouth-Hitchcock Health and UVM Health Network — ahead of a possible partnership agreement. 

Mullin said that given the coronavirus assistance Springfield has received from the state and federal governments throughout the pandemic, it has been given every chance to survive.

“We want people to be more realistic in how they look at their budgets and not come in with a pie in the sky expectation,” he added. 

Springfield’s top executives are slated to submit a revised strategic plan at a later date. 

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Liora Engel-Smith

About Liora

Liora Engel-Smith covers health care for VTDigger. She previously covered rural health at NC Health News in North Carolina and the Keene Sentinel in New Hampshire. She also had been at the Muscatine Journal in rural Iowa. Engel-Smith has master's degrees in public health from Drexel University and journalism from Temple University. Before moving to journalism, she was a scientist who briefly worked in the pharmaceutical industry.

Email: [email protected]

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