The revenue generated by Vermont’s hospital system last year totaled $2.4 billion, which included $375 million from the CARES act. Of that $2.4 billion, the state’s hospitals made a combined profit of $3 million. That’s a little more than a tenth of a percent.
That should concern anyone who has a need for health care services in Vermont and anyone who has an interest in the health of a sector that represents 20 percent of our economy.
The poor health of our hospitals is not something that can be explained away by the pandemic’s impact. Before the virus struck half our hospitals were losing money. The virus made their hole deeper, and it pulled the stronger hospitals down as well. But the overarching challenge faced by our hospitals is the entity that regulates it, the Green Mountain Care Board [GMCB].
The GMCB was put in place with the passage of Act 48 in 2011, a law that “recognizes the fiscal and economic imperative for Vermont to undertake fundamental reform of its health care system.” Part of the law’s objective was to control the costs, which had been averaging between 6.5 percent and 8.5 percent annually. But part of it was to also change the way we pay for health care and to increase the quality of the care provided and to do so more efficiently. The regulators were supposed to drive the system’s reform.
The problem is that today’s regulators have focused almost entirely on the cost side of the equation and given little to no thought about the quality of care, its delivery, or its primary responsibility, which is to change the way we pay our providers. All the hard stuff.
The board’s headline act each year is to limit the percentage increase in net patient revenue, which, by extension is a way to force hospitals to limit doing more than what they currently do. In the last four years — 2020 not included — that growth rate has averaged 3.2 percent. The challenge is that rate is below the cost of medical inflation, which leaves the hospitals with little choice but to cut services, cut costs, and, or dip into their cash reserves. It’s made the hospitals within our system weaker.
Obviously, 2020 threw another wrench into the works. Hospital volumes plummeted. Simultaneously, they became the primary force on the front lines fighting the pandemic. With their budgets blown apart, the GMCB gave them a grace year. The hospitals have asked the regulators to give them a pass for the coming year as well, for the simple reason they have no idea as to what their volume levels will be in a post-Covid world. If you have no clue as to what your volume will be, it’s impossible to gauge with any accuracy how to budget expenses.
GMCB chair Kevin Mullin said no. Hospitals next year are to work within a three percent net revenue increase. He said the board would not be doing its job if it reneged on its budget review process.
That’s not accurate in two respects. The Legislature last year told the board to essentially take the summer off, that the hospitals’ Covid-destroyed budgets could not be reasonably judged. That could be done again. But the bigger issue is that the regulators are essentially dismissing the immense [but ignored] work involved in pay reform, the very reason it is in existence.
In truth, the regulators have made payment reform an increasingly difficult thing for the state’s hospitals to ever accomplish because, over the past four years, they have taken a reasonably managed and relatively strong health care system and brought it to its knees. The reform effort before us is the move from the traditional fee for service system to the all payer model operated by OneCare Vermont. That’s a huge lift. The major players in that reform effort are our hospitals. But how can our hospitals put in the cash, the time, the manpower and the effort to make the all payer model work if they are being bled dry by the regulators?
From a political sense it’s easy to understand the board’s singular focus on costs and the budgets of our hospitals. It’s what the public sees and what the media reports. But that doesn’t move the needle on reforming how we pay for health care. It doesn’t address quality of care issues, or how efficiently that care can be delivered — two objectives that are essential if we are to be successful in the move to the all payer model.
For the five people who sit on the Green Mountain Care Board, it’s this move to the future that should motivate them. That’s the grail that offers hope for a better, more sustainable health care future. To get there will require the board to look at our hospitals as allies not adversaries. The board must assume the role of not only leading, but figuring out ways to be the enablers. The end game has to be reforming the system and that requires ensuring that all partners are strong and willing. The board, in the moment, is focusing on what can’t be done rather than what can.
by Emerson Lynn