Between 2022 and 2023, the University of Vermont Medical Center made more money than it was supposed to.
The Burlington hospital was among four Vermont hospitals that brought in more than their state-approved budgets would have allowed. In its 2023 fiscal year, UVM Medical Center collected roughly $1.74 billion in patient revenue — about $80 million more than the approved $1.66 billion.
Now, a key health care regulator has signaled that it could cut UVM Medical Center’s rates to make up for that excess — a proposal that has upset hospital administrators.
If that plan is enacted, “I worry because we won’t be able to provide the services that I think our patients and our communities need,” UVM Health Network president and CEO Sunil Eappen said in an interview.
The Green Mountain Care Board has the power to cap how much revenue Vermont hospitals can raise from patient care — and how much they can charge commercial insurers for that care. The goal is to control health care costs for insurers and consumers.
But in the 2023 fiscal year, four hospitals — the UVM Medical Center, Porter Medical Center, Northeastern Vermont Regional Hospital and Rutland Regional Medical Center — all raised more revenue than was allowed by the Green Mountain Care Board.
That has posed a quandary for the board: given that those excess revenues were, technically, in violation of state regulations, what should be done about it?
The situation “has happened, but it’s definitely not common,” Green Mountain Care Board Chair Owen Foster said in an interview early last month.
The board is currently in the final stages of assessing the budgets of Vermont’s hospitals, a regulatory process that comes amid widespread concern over the cost of health care in the state.
As part of that procedure, board members have deliberated about the best way to handle the excess revenue from the 2023 fiscal year.
UVM Medical Center has, in fact, exceeded its budget in the past: In 2017, excess revenue brought the network a surplus of roughly $20 million. At that time, the care board ordered the hospital to spend that money on improving access to inpatient mental health.
The UVM Health Network, which includes the Burlington hospital, initially planned to invest that money in a 40-bed inpatient psychiatric facility but later shelved those plans. Instead, the money was set aside for a series of other mental health-related projects, including a mental health urgent care facility, improvements to Central Vermont Medical Center’s psychiatric unit, and an Esketamine program, according to filings with the Green Mountain Care Board.
Many of those projects “are still on track for execution, just not in the original timelines,” network administrators wrote to the board earlier this month.
‘More care to sicker people’
UVM Medical Center administrators have said their revenue came in higher in fiscal year 2023 than budgeted largely for one reason: the hospital saw and treated more patients, part of a surge of hospital visitors in the wake of the worst of the Covid-19 pandemic.
“Over the last several years, we’ve been delivering more care to sicker people,” UVM Medical Center President and Chief Operating Officer Stephen Leffler said at a Monday hearing at the Green Mountain Care Board. “People from across the state of Vermont every day need to be transferred to the medical center to receive care.”
Administrators noted that extra revenue did not translate into extra profit for the hospital — in fact, they said, they lost money on it.
The hospital, the largest in the state, has asked the care board to effectively take no action relative to that budget excess — to allow the hospital to “retain the unbudgeted revenue,” Rick Vincent, a UVM Health Network executive vice president and chief financial officer, said in a letter to the board earlier this year.
But, anticipating cuts to next year’s budget, the UVM Health Network has sent board members a series of letters over the past several weeks questioning the wisdom — and legality — of its actions regarding hospital budgets.
“The GMCB Has Conducted the Budget and Enforcement Actions In A Manner That Violates Its Statutory Obligations,” reads a heading in a Sept. 10 letter sent by Eric Miller, UVM Health Network’s senior vice president and general counsel.
Eappen, the UVM Health Network’s CEO, noted that the board’s orders were not yet finalized and could change. But if the board’s orders are implemented, he said, it will force the Burlington hospital to cut services.
“We are totally in favor of fair, transparent regulation,” Eappen said. “The problem is that if you don’t do it in a really consistent, fair, collaborative manner, we get into these situations where people don’t understand each other.”
He left open the possibility of legal action if the board moves forward with its current plan.
“We will explore every possible venue to protect Vermonters in doing this work,” he said.
‘They are binding orders’
On Wednesday, the Green Mountain Care Board signaled that it intends to enforce its budget caps for UVM Medical Center.
“They are binding orders. The statute reads that hospitals shall comply with them,” Foster, the Green Mountain Care Board chair, said at a hearing Wednesday. “And part of the reason why we have budget orders is to control the expense growth, which is very important. If expense growth continues, Vermont will remain totally unaffordable for health care.”
The care board put forth — but has not yet voted on — a motion to factor the excess $80 million into UVM Medical Center’s rates for the two upcoming fiscal years. The goal is to spread that $80 million across the hospital’s 2025 and 2026 budgets, which would result in a 1% decrease in overall commercial hospital charges for the 2025 fiscal year. The fiscal year starts October 1.
(For other hospitals with overages — Northeastern Vermont Regional Hospital, Rutland Regional Medical Center and Porter Medical Center — the care board has proposed softer enforcement steps or none at all.)
UVMMC administrators, meanwhile, reacted to that motion with dismay.
“This action will hurt Vermonters,” Leffler, the UVM Medical Center president and COO, said at Wednesday’s hearing. “I can’t imagine this is the right way to help health care in Vermont.”
