Regulators voted Wednesday not to change their expectations for the revenue side of the states’ hospital budgets for fiscal year 2024, despite sustained and ongoing cost increases that led to big reported operating losses in 2022.
The five members of the Green Mountain Care Board unanimously denied a request by the Vermont Association of Hospitals and Health Systems to either adjust the target revenue growth rate upfront or waive its enforcement.
The board reviews each of the 14 hospitals’ budgets annually in a process that begins with a submission due June 30 for the coming fiscal year. Exceeding the revenue target is allowed but opens up the hospital’s budgetary choices to greater scrutiny.
The board set a two-year revenue growth rate of 8.6%, which hospital leaders said in public comments would not be enough to continue existing operations without cuts to services. In last year’s review cycle, approved budgets already exceeded that target for nine out of the state’s 14 hospitals.
“Given the volatility that we’ve seen … during the pandemic and since the pandemic, picking the right ‘number’ is really not feasible,” board member Robin Lunge said. “I think sticking to the commitment that the state made as sort of a long-term target is a rational place to go.”
Budgets that exceed the growth target go through additional analyses to understand the reasons for growth. Causes could include more people seeking services, more services being offered, or an increased price for services paid by commercial insurers or federal and state programs such as Medicare and Medicaid.
Board members said they are concerned about the affordability of health care for small businesses and Vermont families who are all trying to manage the impact of inflation on their budgets.
That was particularly on their mind after commercial large- and small-group insurance rates were increased by about 11% for 2023 in different markets. Insurers consistently point to increasing hospital and pharmaceutical costs as the biggest drivers of premium hikes.
“If the (revenue growth rate) overage is due to double-digit commercial rate increases … that’s going to be a harder sell,” board member Jessica Holmes said. “The point is commercial (insurance rates) can’t be the only way we have to plug holes. Vermonters can’t afford it.”
Almost 100 organizations and individuals weighed in on the issue in public comments, with roughly equal support for keeping and scrapping the growth targets.
Hospital leaders and trustees argued that, without additional revenue, the hospitals would have to cut services that their communities rely on.
Meanwhile, independent practitioners said they provide similar medical or diagnostic services to hospitals in some areas for half to one-third of the price to commercial payers and are facing the same inflationary pressure.
Board members asked hospital leaders to work with them on creative solutions to cut expenses.
“It’s unclear if the choice is as binary and as stark as presented: Either give hospitals the money that they request or cut services,” board chair Owen Foster said. “I hope these are not the only options.”