Today, The University of Vermont Medical Center and Central Vermont Medical Center filed to request mid-year adjustments from the Green Mountain Care Board to their FY22 budgets, which went into effect on October 1, 2021. The request can be found here.
Key facts: The recent sharp rise in inflation has made daily life more difficult for nearly all Vermonters. Health care providers are not immune to those pressures. The UVM Health Network projects a nearly $108 million increase in UVM Medical Center’s expenses and more than a $15 million increase in UVM Health Network-Central Vermont Medical Center’s expenses for the year. This is due to rising cost inflation, over and above the amount already incorporated in the budgets approved for both hospitals by the Green Mountain Care Board last August. Year-to-date, both UVM Medical Center and CVMC have varied substantially from their approved FY 2022 budgets, and both hospitals are facing exceptional and unforeseen circumstances that require the requested budget adjustment in order to preserve the ability to serve the health care needs of people living in Vermont. While these costs would justify a commercial rate increase well over 20 percent, the two hospitals have filed a request with the GMCB for a 10 percent increase at this time.
This is the first time any UVM Health Network hospital has requested a mid-year budget adjustment. If approved, the rates would go into effect starting April 2022 through September 2022. A mid-year increase helps ensure that rates needed in FY 2023 will be less than currently projected.
Expected vs. actual inflation: When UVM Medical Center and CVMC filed their hospital budgets in 2021, they assumed inflation between 2.3-2.5%. By January 2022, the hospitals experienced annualized inflation rates of 9.2% and 8.2%, respectively. These persistent expense increases are driven by cost inflation in wages, goods, services, pharmaceuticals – and almost every other facet of our work.
Projected losses at UVMMC and CVMC: After accounting for federal relief dollars, UVM Medical Center is projected to lose $39 million this fiscal year, including a loss of $23 million in the first quarter. CVMC projects a loss of $5 million. These losses come despite significant efforts to recruit staff and reduce the need for contract staffing. UVM Health Network - Porter Medical Center will continue to receive federal payments made to small critical access hospitals, helping to avoid a similar situation.
Continued investments in workforce and patient care required: The community will continue to hear about hospitals investing and spending to stabilize the workforce during a national staffing crisis, and to maintain patient care and improve access to high quality care and services that respond to patient needs.
About the hospital budget process in Vermont: Hospital budgets in Vermont are regulated and must be approved by the Green Mountain Care Board, a process not followed in any other state. Medicare and Medicaid rates are set by the government and have historically not kept pace with inflation. The Green Mountain Care Board approves commercial rate increases, setting the overall amount of revenue hospitals are able to take in from commercial insurance companies. Rate increases do not mean that individual patient premiums or the cost of an individual service will increase by the same amount.
Important note: While the budget adjustment requests are a response to recent cost increases and needed investments, they also have deeper roots. The Network entered the COVID-19 pandemic in an already difficult financial position, in part due to stagnant Medicaid and Medicare rates and years of Green Mountain Care Board rate approvals that have not covered even modest inflation. This is basic math: To function, Vermont’s not-for-profit hospitals must take in enough revenue to cover the costs of patient care, which increase every year.
From John R. Brumsted, MD, UVMHN President and Chief Executive Officer:
“Over the past two years, our health system has adapted to massive changes in patient and community need, responding with significant and often rapid shifts in operations and staffing, and we are proud of that work. But we are not in recovery mode – with recent inflationary increases coming on the heels of necessary investments to manage COVID-19 and unprecedented patient volumes, we are simply trying to stabilize, and have submitted this request for a mid-year adjustment out of necessity so we can continue to provide the care our patients expect to receive locally.”
From Stephen Leffler, MD, UVMMC President and Chief Operating Officer:
“Over the last two years, UVM Medical Center has dedicated its resources and expertise to help Vermont and Vermonters get through the pandemic. As we continue to meet the health needs of our region, rising costs of delivering care have had a severe impact on our organization. Right now, we need the Board’s support as we chart the course from crisis to stability, and eventually to recovery.”
From Anna Noonan, RN, BSN, MS, CVMC President and Chief Operating Officer:
“For the past two years of our COVID-19 response we have come together to ensure we provided the care that our communities needed. Now we need the support of state officials, regulators, and Vermonters to continue to deliver the care and services our communities have come to expect and rely on.”