The state’s main health care regulator approved budgets for all 14 of Vermont’s community hospitals during two hearings convened last week. The Green Mountain Care Board forced a reduction of almost $95 million to the revenue that hospitals can receive next year from commercial insurers, with the large majority cut from the budget of the University of Vermont Medical Center, the state’s largest hospital, based in the Burlington area.
The care board annually reviews the hospitals’ budgets for the upcoming fiscal year, which begins Oct. 1. The process gives the board a way to place caps on what the hospitals can charge commercial insurers for services and how much revenue they can bring in as a result of those charges.
This year, the board approved the proposed budgets from eight of the state’s hospitals without any changes. UVM Medical Center’s allowed charges to commercial insurers were cut by roughly $88.5 million — from a proposed $1.16 billion net revenue from commercial insurers to the approved $1.07 billion.
UVM Medical Center’s initial budget proposal already included a significant rate reduction of 7.9%. That percentage reduction took into account the requirements of new legislation as well as a care board enforcement action, which required lowered future costs to commercial insurers to compensate for the hospital receiving more revenue than the care board approved for fiscal year 2023. However, without those adjustments, the hospital’s request was for a 2.4% increase in commercial revenue. The board’s approved commercial revenue cap amounts to a 6.4% cut in general and a total of 16.7% decrease when the impact of the enforcement and new legislation is included.
Relatively minor cuts were sustained by the other two Vermont members of the University of Vermont Health Network: Central Vermont Medical Center in Berlin and Porter Hospital in Middlebury. The board also cut the budgets submitted by Brattleboro Memorial Hospital, Copley Hospital in Morrisville and Southwestern Vermont Medical Center in Bennington more substantially as a percentage of their size.
While the total dollar amount of budget reductions came in lower than what was cut during the same process last year, the review comes as curbing hospital and commercial insurance prices has become a matter of intense focus by the Legislature and the administration of Gov. Phil Scott. As a result of those efforts, which included a cap on hospital charges for outpatient injectable drugs, hospitals were already projecting smaller cost increases than in recent years.
Recently, the state’s Department of Financial Regulation, an appointed independent liaison and Scott himself have pushed to bring health care costs in line with what’s affordable for Vermonters.
“The fact is, like in education, well-intentioned policies Vermonters were promised would make things better and more affordable are not working as intended, and many have become counterproductive,” Gov. Scott wrote in a Sept. 4 press release. “The status quo has allowed unacceptable amounts of administrative cost growth, unbearable pricing strategies, and perverse financial incentives and executive bonuses paid for by skyrocketing premiums,” he went on.
The letter served as a signal to some longtime observers that this year’s decisions might have even more riding on them.
“I’ve never seen anything remotely that incisive, quite frankly,” Sam Peisch, a policy analyst at the health care advocate’s office, said in an interview with VTDigger.
Focus on UVM Health Network
The board spent most of its discussion on Friday narrowing in on the imbalance in costs between UVM Medical Center, which provides direct patient care, and its parent company. The UVM Health Network owns two other Vermont hospitals — Central Vermont Medical Center and Porter Medical Center — and three in eastern New York state.
Board chair Owen Foster did not mince words at Friday’s meeting.
“University of Vermont Health Network does not provide health care,” Foster said. “It’s essentially an expensive and ineffective layer of overpriced and unnecessary corporate bureaucracy that has proven itself both physically and spiritually distant and unconnected from the mission of our flagship academic medical center and the needs of Vermonters.”
Foster outlined what he called the “corporate shell game” of cash flow from the medical center to the network and the network’s three New York hospitals. That cost shift results in the medical center’s profit margins and cash reserves appearing smaller than they should be, he said.
During Friday’s hearing, Foster became particularly animated when citing the service cuts UVM Health Network made last year: He explained that while the network shuttered dialysis programs and clinics in the Mad River Valley, it also moved $10 million from UVM Medical Center to its New York hospitals.
Under the network’s management, Vermont’s hospitals have seen “unrelenting expense growth far exceeding inflationary metrics,” Foster said, while the quality of care has deteriorated and the gap between executive compensation and the network’s lowest-paid workers has widened.
Foster cited “excessive charges” for life-saving medications and medical imaging, and a waitlist of more than 3,000 patients for a colonoscopy, all while the network invests in its lobbying and external-relations arm. He worried about the impact of losing services like birthing centers or primary care clinics all across the state while individuals, families and insurers all struggle to keep up with the high cost of health care.
The budget the care board approved purposely left no margin for the UVM Medical Center to add to its reserves, citing the fact that the hospital’s reserves go to the health network. Allocating more reserves to the medical center would go against the care board’s mission, Foster said, “given [the Network’s] use of Vermont money to cover its inability to sustainably operate New York hospitals that it owns,” Foster said.
Earlier in the week, Foster floated a proposed budget condition that would restrict the flow of funds from UVM Medical Center to the health network or to its New York hospitals. However, the health network’s general counsel Eric Miller filed a letter stating that the care board’s attempt to do so went beyond its mandate and violated the Constitution:
“Seeking to regulate that interaction, at the eleventh hour of the budget-setting process, without taking any testimony, providing any opportunity for hearing, or setting any standards on the topic would be arbitrary and capricious and lead to unintended consequences that will inhibit hospitals and insurers from working together to reform the way health care is reimbursed,” Miller wrote.
During the public comment period at Friday’s hearing, Stephen Leffler, UVM Medical Center’s president, responded to the board’s frustration with the structure of the health network saying, “I agree with many comments about how we have to be better and work better with you, but I do caution not to throw everything about the Network away.”
He cited the good he sees coming from the network, like the flow of patients across both sides of the border with one electronic medical record system so that scans and tests done in one state can be used by a specialist in the other. Also, the relationship allows for the network to increase specialty services in different regions while also lightening the overall load on UVMMC, Leffler said.
The UVM Medical Center’s board of trustees is committed to making improvements to quality and meeting the care board’s budget requirements, said the hospital trustee chair Jesse Bridges, during Friday’s public comment period. “Our volunteer boards are working hard to do their best to make sure that we are pulling and pushing in the right direction,” Bridges added.
The care board also approved a budget condition that it says gives the hospital flexibility to lower prices for outpatient care as part of negotiation with insurers.
Following the board decisions, UVM Health Network spokesperson Annie Mackin expressed the group’s desire to move forward with what the care board handed down.
In a statement, she wrote: “University of Vermont Health Network is proud to provide health care to more than a million people in Vermont and northern New York. We have committed to collaborating as a strong partner in reducing expenses, limiting growth of hospital costs, and providing high-quality, sustainable care to the communities we serve.”
She said that the network will review the written budget orders when they are published on Sept. 30. “Much work remains, and we and our partners will need to continue taking steps to improve affordability not just in this budget cycle, but in the months and years ahead,” she added.
In his Friday comments, Foster expressed gratitude for the providers and work of the hospitals themselves, despite high costs: “University of Vermont Medical Center’s problem is not with the care board or Vermont’s inability to give it money. It’s with its own corporate parent that has drained its assets and forced it to pay for an unnecessary layer of corporate bureaucracy. The Health Network has proven to be an irresponsible steward of Vermont’s limited health care dollars,” he said.
