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Vt. Hospital Usage Slows, But Rates Rise

The amount of money hospitals raised from patients would grow at a slower rate in 2014 than at any point in recent history. But the rates patients would be charged for goods and services would rise at a higher rate, if the Green Mountain Care Board accepts the proposed budgets of Vermont’s 14 community hospitals.

Vermont’s 14 community hospitals want to raise prices for patients even though rates of use are lower.

The average amount of money hospitals seek to raise from patient care in 2014 is greater than this year, but the rate of growth is lower than it has been for at least five years.

That doesn’t mean individual patients will pay less or even an amount that is on par with the slower revenue increase. Rates for hospital goods and services are set to increase more than revenues are — if the Green Mountain Care Board accepts the proposed 2014 hospital budgets released Thursday.

The across-the-board proposal of a 3 percent increase in net patient revenues for 2014 compares to a 6.5 percent increase in 2013, and a 7.8 percent increase in 2009.

Earlier this year, the Green Mountain Care Board set a 3 percent limit on the additional amounts that hospitals could raise in patient revenues for 2014, 2015 and 2016. The board, which is tasked with controlling the growing costs of health care in Vermont, is allowing an extra 1 percent wiggle room next year for expenses related to health care reform, like setting up preventative care systems and shifting to more progressive budget models. This is the second year the board is in charge of regulating hospital budgets.

While the total growth in patient revenues is set to decline next year, hospitals want to raise rates for goods and services by 6.2 percent. That uptick in what a patient enrolled on commercial plans will actually pay for care is comparable to last year’s increase in rates of 6 percent and is slightly above the four-year average — including the proposed rates for 2014 — of 6.1 percent.

Mike Davis, director of health system finances for the board, said that one of the leading factors contributing to rates increasing more than revenues is that hospital use is down. If the hospitals would have level-funded their budgets, and the number of people using their services dropped, individuals would have to pay more for the same budget because there are fewer people paying that same amount.

But haven’t health care officials been saying for years that if Vermonters reduce their use of health care services, costs would come down?

“What happens is that if you did that five years in a row, the cost structure would start coming down because there would be a fundamental change in the budget,” Davis said. One year isn’t necessarily a long enough trend to drive down those costs.

Davis said that changes in Medicare and Medicaid use and reimbursements affect commercial rates, as does inflation.

Board member Al Gobeille, who is poised to become the chairman this fall, says this issue requires a lot more analysis. The board and its staff will drill into the budgets over the next month, hold hearings with the hospitals at the end of August, and allow or deny the current budgets in mid-September. As part of a deeper analysis, Gobeille wants to weight budgets based on patient volume.

“You would think if utilization is coming down, you wouldn’t just raise price to cover the cost,” he said. “That is something we have to analyze.”

Another weight on hospital budgets is a 2 percent reduction in Medicare payments to providers that the federal sequestration dealt them in spring.

In Bennington and Rutland counties, which have older populations, these cuts have led to job reductions. According to state data, Rutland Regional Medical Center carved out 113 non-physician jobs for next year, and Southwestern Vermont Medical Center is reducing its workforce by 92 positions. Those are the largest across-the-board decreases in labor force at any two hospitals.

Both of these hospitals, however, are under the cap for net patient revenues. While Rutland proposes to increase patient revenues by 3 percent in 2014, Southwestern plans to reduce revenues by 6.4 percent. Two other hospitals — Mount Ascutney Hospital in Windsor and Grace Cottage Hospital in Townshend — also proposed revenue reductions.

Of the $62 million in overall hospital revenue increases for 2014, almost 80 percent comes from Fletcher Allen Health Care. Fletcher Allen has an overall budget that is greater than $1 billion, and its net patient revenues account for roughly half the proposed $2.1 billion in revenues from all 14 hospitals.

Fletcher Allen, with its 4.8 percent increase in net patient revenues, is one of three hospitals proposing revenue increases of more than 4 percent. Brattleboro Memorial Hospital’s budget features an increase of 6.2 percent and Northwestern Medical Center in St. Albans is proposing to raise revenues by 5 percent.

Fletcher Allen CEO John Brumsted said that roughly $20 million of the $48.4 million in budget growth would go to reforming the hospital’s infrastructure.

“It was a very difficult budget year because … we’re trying to decrease trended growth, while we’re being asked to make major investments in the delivery system to change from the old world of fee-for-service to a tighter knit group of partnerships that will be receiving reimbursements in a different way,” he said.