Vermont’s health care regulator, the Green Mountain Care Board, wrapped up its review of the budgets of the state’s 14 hospitals on Friday by requiring another four of them to scale back expectations for increasing their charges in 2024.
In all, the board required half of the state’s hospitals to cut back how much they planned to charge for their services, resulting in an estimated combined $145 million in budget reductions, according to a press release issued by the board. Most of that comes out of the budget of the University of Vermont Medical Center because of its size, with almost $1.9 billion in patient-related revenue.
The combined trims should limit the increase in costs to insurers next year to 4.1%, the board said in its release.
At a meeting Friday, the board approved its final four budgets. It allowed Copley Hospital in Morristown and Northeastern Vermont Regional Hospital in St. Johnsbury to increase their charges the most, by 8 and 7%, respectively. But both had sought increases of 15%.
Also on Friday, the board reduced Central Vermont Medical Center’s request for higher charges from 10% to 5%, while Porter Hospital’s request was reduced from 5% to 3.1%. Both hospitals are part of the University of Vermont Health Network.
The largest hospital in the network, UVM Medical Center, saw its charge request reduced significantly as well on Wednesday — from 10% to 3.1%, which board staff consider to be the rate of cost inflation.
In votes last week, the board trimmed the requested charge increases at two other hospitals slightly, for North Country Hospital, from 4.5% to 4%, and Springfield Hospital, from 7% to 6%. The board approved the rate increases proposed by the other seven hospitals as submitted.
“While we recognize the extreme costs these increases impose on Vermonters, it is important we invest in and support our hospitals,” Green Mountain Care Board chair Owen Foster said in the press release. “Where appropriate, the Board limited hospital price increases and required additional reporting and planning to promote efficiency and access.”
Most hospitals were allowed to increase their charges significantly in 2023 to help cover sharp increases in labor, material and pharmaceutical costs during the Covid-19 pandemic. This year, care board members generally only allowed increases that enabled hospitals to match the rate of inflation or brought them in line with the increases that other hospitals received the previous year.
Combined, the 2023 and 2024 commercial charge increase would have amounted to a two-year jump of more than 21% if approved as submitted, the board said in the press release. Its reductions brought that two-year increase down to 14.6%, with more than 10.5% approved last year and already in effect.
The two years of increases approved by the board are more than double the 7% rate of medical inflation as measured by the federal Medicare program, Foster said in the release. The board also noted that Vermonters’ wages only grew by 8.6% on average during that period.
The percentage increase in what hospitals charge for care applies in general to all types of payers but ends up affecting only commercial insurers. That’s because payments by Medicare and Medicaid are set at the federal and state level by lawmakers, while private insurers negotiate annual price agreements with each hospital.
The state’s two major insurers —- BlueCross Blue Shield of Vermont and MVP Health Care —- each received approval for major premium increases next year, pointing to increased hospital charges as a primary cause.
The five members of the care board review each hospital’s proposed budget for the upcoming fiscal year. The board’s staff members analyze the proposals in the context of previous years and as compared to other hospitals in the state or region with a similar structure. The process takes several months and is completed just before the start of hospitals’ fiscal year in October.
This year, in addition to a cap on the increase in hospital charges, the board also set a limit on the growth in patient-related revenue at each hospital over 2022. The state’s hospitals, all nonprofits, requested increases in revenue that varied widely from institution to institution.
Patient revenue grows as a result of many factors in addition to price, including an increase in the number of health care providers and services offered, or an increase in the number of patients served.
Board members repeatedly stated that they wanted hospitals to do what they could to serve more patients and reduce wait times for appointments. To allow for that kind of growth, regulators approved revenue increases at most hospitals, for an overall increase of $218 million over the 14 hospitals, or 6.6 percent, the board said.
The administrators for Copley and Northeastern Vermont — two smaller regional hospitals that received reductions to their charge increases on Friday — reacted with polite dismay at the votes. The board trimmed the increase in both overall patient revenue and the commercial insurance charges for Northeastern, while only the increase in charges was brought down for Copley.
If Copley is able to increase its costs by only 8% this year, rather than the 15% increase it asked for, the hospital will operate at a deficit for the ninth year in a row, said CEO Joe Woodin. The hospital’s costs have remained among the lowest statewide for two decades, so it needs large percentage increases to bring it up to the average, he said.
“When our rates continue to be so low, when you say, in essence, well, you’ll make it up on volume … when I do more volume, I’m still losing money,” Woodin said.
Shawn Tester, CEO of Northeastern, said that lowering his hospital’s requested increase from 15% to 7% will mean it won’t be able to move forward with needed investments in staff, building improvements and community partnerships.
Care board chair Owen Foster said he appreciated how difficult some of the board’s decisions will be on affected hospital administrators and staff. Throughout the hearings, he and other board members have discussed other factors they must weigh, including the impact of increasing hospital charges on other unaffiliated health care providers and their contribution to ballooning insurance premiums.
“We are here to help and make every hospital as sound as we can,” Foster said, responding to Woodin. “We’re trying to support hospitals as much as we can while balancing all the other considerations we have.”
Correction: An earlier version of this story misidentified the year that the increases in patient revenue approved by the Green Mountain Care Board are compared against. The approved rate is an increase over two years.
