The pandemic’s inflation and ballooning staffing costs have affected every hospital in Vermont, but only the state’s wealthiest hospitals have asked regulators for midyear price increases.
The big three — University of Vermont Medical Center, Central Vermont Medical Center and Rutland Regional Medical Center — say the change in charges would cover a projected $51 million deficit in the current fiscal year, which ends Sept. 30.
The state’s remaining nonprofit hospitals, all of them smaller and much more vulnerable to the financial whims of the market, have not made similar requests to date. The deadline for filing for midyear budget adjustment is May 1.
The Green Mountain Care Board has scheduled hearings on the hospitals’ requests this week.
When they talk about their current financial situation, executives from the three hospitals paint a grim picture.
Rutland Regional representatives declined to discuss their request outside the Green Mountain Care Board hearings on their situation, but Claudio Fort, the hospital’s chief executive and president, told the board last week that the implications of the deficit could include “not having the bed available and having a patient in our emergency room, gasping for breath.”
In an interview Monday, Rick Vincent, chief financial officer at UVM Medical Center, said the deficit could force the network to borrow money, threatening the hospital’s long-term financial health.
To handle the deficit, Rutland Regional asked for a 9% increase in service charges. UVM Health Network asked the Green Mountain Care Board for a 10% increase in service charges for its Burlington and Berlin hospitals. If approved, these increases could mean consumers with private insurance could pay much higher premiums next year.
But financial filings from the previous fiscal year tell a different story. Thanks to state and federal aid, the three hospitals took home a collective $181 million surplus in the fiscal year that ended Sept. 30, 2021.
University of Vermont Health Network had more than $1 billion in reserve in fiscal year 2021, according to its filings to regulators. Rutland Regional had some $160 million in reserves, the filings show.
The reserves are a financial cushion hospitals can draw on for unforeseen expenses. Health economists compare these funds across hospitals in terms of days of cash on hand. It’s a measure of financial health and long-term stability. On average, rural hospitals nationally kept just over a month of cash on hand in fiscal year 2021, according to the National Rural Health Association.
UVM Medical Center has more than six months’ cash on hand, according to last year’s filings. Central Vermont Medical Center, the UVM affiliate in Berlin, could survive for almost four months. And at more than nine months, the reserve from last year could sustain Rutland Regional the longest.
To be sure, spending down those reserves isn’t financially prudent. Rutland Regional executives told the care board that a healthy reserve is the “safety net” that keeps the hospital independent. Executives also said they need a significant chunk of the reserve intact as a requirement of loan agreements. Fort, the CEO, also argued that volatility in the stock market could suddenly wipe out a significant portion of the reserve.
Vincent, from UVM Medical Center, said the hospital is already using some of its reserves. In early January, he said, the Burlington hospital’s cash on hand dropped from more than 180 days to roughly 150 days.
Vermont’s smaller hospitals, in the meantime, are carrying anywhere from roughly a month and a half of operating expenses — as at Springfield Hospital, which recently emerged from bankruptcy — to just under a year’s worth of money in the case of Gifford Health in Randolph.
Representatives from Gifford Health said last week they do not intend to ask for a midyear budget adjustment. Springfield Hospital did not respond to repeated requests for comment, but a spokesperson from the Green Mountain Care Board said there had been no new filings as of Monday.
Regardless of this week’s hearings, consumers with private insurance almost certainly would face some increase in premiums next year.
Care board members are discussing the size of increases in next year’s budgets, and the board’s staff is already recommending raising the allowed hospital growth from its 3.5% ceiling to 6.1% in the next fiscal year. The board rarely deviates from staff recommendations.
Consumers, for their part, have registered their discontent with the status quo. More than 20 people have already filed comments opposing the hospitals’ requests. A representative from the Vermont State Colleges said a rate increase would have an “unprecedented impact” on the organization’s already “delicate finances.”
In her letter to the care board, small business owner Kelley Tessier of Burlington said she could not afford the increase in premiums.
“No one can afford this increase,” she wrote. “No one. UVM Medical has a reserve. I understand the logic for having one, but they really need to use some of it to absorb their losses.”