Vt. Hospital Revenues Over Budget in 2017

Saturday, February 17, 2018

Montpelier — Vermont hospitals saw greater-than-expected patient revenues in fiscal 2017, with three University of Vermont Health Network hospitals and one Dartmouth-Hitchcock affiliate leading the way.

New statewide figures released by the Green Mountain Care Board show that net patient revenues exceeded the hospitals’ state-approved budgets by $23.7 million last fiscal year.

Some hospitals, including the Upper Valley’s Gifford Medical Center in Randolph and Springfield (Vt.) Hospital, ended up far below budget. But University of Vermont Medical Center, Central Vermont Medical Center and Porter Medical Center finished a combined $43.8 million over their net patient revenue budgets. The Windsor-based Mt. Ascutney Hospital and Health Center, a D-H affiliate, also was over its budget for net patient revenue by about $508,000.

The care board has just begun its analysis of fiscal 2017 budget results. But John Brumsted, UVM Health Network’s president and chief executive officer, said increased hospital utilization was the main driver behind higher revenues.

“What that reflects is 4 percent more people showed up than we predicted ... and they were sicker, and they stayed longer,” Brumsted said.

Brumsted added that predicting patient volumes for budgeting purposes is getting more difficult. “The degree of uncertainty over the last three or four years, I personally have never seen,” he said.

The Green Mountain Care Board approves annual hospital budgets and also reviews financial results after the conclusion of a fiscal year.

A primary measurement for the board’s review is net patient revenue, which is not the same as profit. Rather, it is the amount of revenue a hospital receives from patient care before expenses are figured in.

The care board allows a 0.5 percent variance from budgeted net patient revenues. Health care facilities that exceed that variance are subject to review and possible regulatory action, which could include the care board ordering a reduction in rates — the prices a hospital charges for services.

According to a new report from the care board, eight of the state’s 14 hospitals finished under budget in terms of net patient revenues in fiscal 2017. In the Upper Valley, Springfield (Vt.) Hospital came in $6.85 million below budget for net patient revenues, while Gifford Medical Center came in $3.17 million below budget.

Both Springfield and Gifford, in filings with the care board, attributed the lower-than-expected revenues to lower patient volumes in inpatient, surgical and emergency departments. A contributing factor in Springfield was a delay in recruiting a new orthopedic surgeon. Gifford also has struggled with recruitment in this area, according to statements made by its CEO to the care board at an August hearing.

Two other hospitals were slightly over budget for net patient revenues, but still within the care board’s allowable variance.

Four hospitals exceeded that variance. Mt. Ascutney was $508,325 over budget, which translates to just $269,601 more revenue than the care board’s threshold.

From a regulatory perspective, “we would suggest maybe to move beyond that just because the dollar amount is not much,” said Andy Pallito, the care board’s health systems finance director.

Pallito said the UVM network hospitals’ results may be more notable. Porter’s net patient revenues were $2.1 million over budget; Central Vermont’s were $3.4 million over; and UVM Medical Center’s were $38.3 million over.

UVM Medical Center — by far the state’s largest hospital — had budgeted for $1.17 billion in net patient revenues in fiscal 2017 and ended up with $1.21 billion. That was 3.3 percent over its budgeted revenues, the highest of the three UVM hospitals.

“We’re working with UVM Health Network to understand what the drivers are,” Pallito told care board members on Wednesday. “It appears at this point that it’s predominantly (patient) utilization, and not a result of allowing their rates to grow.”

UVM Health Network administrators said that is indeed the case, writing to the care board that the network has been decreasing its rates but “was called upon to care for many more patients than anticipated.”

At UVM Medical Center, inpatient admissions were 4 percent above projections and total patient days in the hospital were 8 percent above projections.

Central Vermont’s increases were “attributable to higher demand for outpatient and infusion services,” network administrators wrote. Porter’s gains were due to “enhanced availability of more efficient urgent care and infusion services along with increased demand for women’s health and cardiology services.”

The hospitals’ expenses also rose because more staffers were needed to treat those patients, officials said. When expenses were figured in, the three hospitals ended the fiscal year with net income that was $16.9 million, or 0.9 percent, over budget.

Brumsted said the federal Affordable Care Act, which “changed peoples’ utilization and their access” to health care, has made it more difficult to estimate patient numbers for budgeting purposes. He also mentioned factors such as the state’s health care reform efforts and the growth of the UVM network.

But the primary reason hospitals are seeing increased patient numbers is “because we’re getting older,” Brumsted said. UVM Medical Center saw $26 million more in Medicare revenue than had been budgeted in fiscal 2017.

“The big driver here is increased Medicare utilization, and I think that’s just the older population,” he said.

Green Mountain Care Board officials expect to continue reviewing detailed fiscal 2017 hospital budget performance documents over their next several meetings.

That will include asking questions of UVM network administrators. Officials want to allow the network to respond later this month “and then have them give us a plan for how we bend this curve,” Pallito said.

The Vermont Association of Hospitals and Health Systems issued a statement on Wednesday noting that, statewide, hospitals’ net patient revenue increased by 2.8 percent from fiscal 2016 to fiscal 2017. That’s “significantly lower than annual increases of nearly 9 percent a decade ago,” the association noted.

“We are pleased that Vermont’s hospitals came so close to the target set by the (care board) while managing significant challenges such as caring for our aging population, the mental health crisis, the opiate epidemic and ongoing federal uncertainty,” said Jeff Tieman, the association’s president and chief executive officer.

“At the same time, we know there is more work needed to make health care more affordable, which is why we are investing in wellness, prevention and population health,” he added.

Care board Chairman Kevin Mullin said that, while the state’s health care expenditure growth has slowed, Vermonters still are paying far more than the national average.

That was borne out last year in Kaiser Family Foundation studies showing that, as of 2014, Vermont ranked third in the nation in per capita hospital spending and fifth in the nation in overall health care spending.

“I don’t think we can really be patting ourselves on the back,” Mullin said.

Valley News Staff Writer Nora Doyle-Burr contributed to this report.