The Green Mountain Care Board on Monday approved budgets for Vermont’s 14 hospitals that will broadly reduce what they collect from commercial insurers next fiscal year, continuing an aggressive state effort to rein in health care costs.
The decisions largely reflected guidance the board issued earlier this year calling for hospitals to reduce by 1 percent both the prices they charge commercial insurers and the total amount they collect from those insurers, with some exceptions based on hospitals’ financial health, prices and access to essential services.
Across the state’s hospitals, the board generally sought to reduce both, while allowing some hospitals up to 2 percent increased commercial revenue based on their individual circumstances. The steepest price cut, 4.4 percent, was assessed to the University of Vermont Medical Center, the state’s largest hospital.
The budget decisions represent another significant push by state regulators to translate Vermont’s health care affordability crisis into actual reductions in hospital prices and spending. Hospitals account for nearly half of health care spending in Vermont, compared with about one-third nationally, making them a major focus of the state’s cost-cutting efforts.
Rather than allowing hospitals to cover growing expenses by charging private insurers more — costs that are ultimately borne by businesses and patients — the board has looked to hospitals to lower costs, shift care to less expensive settings and operate with tighter commercial revenue limits.
For most hospitals, the board landed at or below its 1 percent commercial reimbursement rate-reduction target. In several cases, the regulators voted for substantially larger cuts than the hospitals proposed.
The board took a similar approach to commercial revenue, generally pushing it down while making exceptions for patient volume, financial pressures or access to essential services.
Northwestern Medical Center, one of the state’s lower-priced hospitals, was allowed to raise commercial prices — though less than it had initially requested — as it expands access and takes some patients who might otherwise receive more expensive care elsewhere. Springfield Hospital also received a small increase, along with additional money for inpatient psychiatric care. Brattleboro Memorial Hospital, which reversed its decision last week to close its birthing center, was allowed to keep commercial reimbursement rates flat, with special allowance intended to help preserve obstetric care.
The board’s decisions on UVM Medical Center and Central Vermont Medical Center, both part of UVM Health, highlighted the tension between affordability and hospital finances.
Last year, regulators cut more than $88 million from UVM Medical Center’s proposed budget and ordered a steep reduction in commercial reimbursement rates. Since then, UVM Health has installed new leadership and embarked on an extensive cost-cutting campaign, eliminating jobs and administrative expenses as it tries to adapt to lower revenue.
On Monday, the board decided UVM had further to go. Members ordered the medical center to cut the prices it charges commercial insurers by 4.4 percent — far beyond the flat rate UVM Medical Center had requested and the board’s own 1 percent commercial reimbursement rate guidance. The board was less aggressive with the medical center’s commercial revenue, limiting it to a 1.3 percent reduction, to roughly $1.05 billion. The budget passed 3-2, with chair Owen Foster and outgoing member Jessica Holmes voting no.
Board member David Murman acknowledged UVM Medical Center’s important role in Vermont’s health care system but argued that the steeper cuts were appropriate.
“I do think UVM is in the most fortunate position in the state with the largest reserves and can weather a bit of a reduction,” Murman said.
Dr. Stephen Leffler, chief executive officer of UVM Health, warned the consequences of such a cut could be significant. He told the board that the medical center expects to lose roughly $75 million this year and at least that much again next year under the approved budget. He also cautioned that the hospital’s reserves were “only holding up right now because of the stock market.”
“If this is the budget we get, we will deal with it,” Leffler said, “but I am very concerned that a stock market change could have huge implications on what we’re allowed and able to do over the next year or two.”
In a memo provided to the Green Mountain Care Board and UVM administrators earlier this summer, Mike Smith, an independent liaison to UVM Health appointed by the board, cautioned against expecting UVM to shoulder too much of the state’s affordability push. His team recommended $50 million in additional cuts to UVM Health’s proposed budget, but Smith warned that the burden must extend beyond the network. UVM Health is large, he wrote, but “it is not the entire health care system and therefore cannot be expected to be the sole contributor to solve the state’s healthcare affordability crisis.”
The financial strain at UVM Medical Center ultimately shaped the board’s treatment of Central Vermont Medical Center. In a final vote, board members decided to give the Berlin hospital more breathing room, avoiding an impasse and approving a slightly smaller price reduction than some members initially favored after Foster cited the steep losses at the network’s flagship hospital.
Mike Del Trecco, president and chief executive officer of the Vermont Association of Hospitals and Health Systems, criticized the cuts.
“I think that every decision made today will further destabilize the financial outlook of our hospitals,” Del Trecco told the board on Monday.
Hospitals can appeal the board’s final decisions or seek adjustments if circumstances change but otherwise must now figure out how to live within the new limits. The budgets take effect October 1.
Correction: An earlier version of this article misidentified Mike Smith’s title. He is an independent liaison to UVM Health appointed by the Green Mountain Care Board.
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