Is the State’s Revenue Cap on Hospitals Workable?
Mar 7, 2013 3:36 pm| Permalink
We will make it work, but this approach has implications that will impact services as the demand for care increases. The Green Mountain Care Board (GMCB) which regulates Vermont’s hospitals has established a 3% net revenue cap for each of the next three years. Their statement said: “When 2014 hospital budget year begins on October 1, 2013, Vermont hospitals will be permitted to raise their net revenues by as much as three percent per year for each of the following fiscal years (2014-2016). In fiscal year 2014, hospitals will be eligible to spend up to an additional one percent on ‘health reform investments.’ The amount allowed for health reform investments will decrease to 0.8 percent in 2015 and 0.6 percent in 2016.”
It is important to note that this is a cap on “net revenues” not a cap on hospital rates. A “net revenue” cap controls the amount of care provided, not how much that care costs. While this approach will contain the overall amount of money the State puts into healthcare overall, it does not address the growing demand for medical services from an aging population or the anticipated growth in demand when Vermonters without health insurance are brought into the ranks of the insured. As the demand for services grows and the availability of services is constrained by a revenue cap, difficult choices will have to be made if nothing else changes. There is no doubt within the next 3 – 5 years we are going to have to decide what services we provide and what services we no longer provide. As healthy as we are today financially, this financial picture declines significantly with the current forecasts.
At NMC, we are challenging ourselves to make changes that will result in additional efficiencies without impacting access or quality. For example, I am pleased to report that the initial results from the current phase of our pilot to reduce avoidable visits to our Emergency Department (ED) are promising. Through proactive case management, we are seeing some success in working with frequent non-emergent users of the ED to help them get the care they need in more appropriate and affordable settings, such as Primary Care, Mental Health, or Walk-In Clinic. While NMC’s charges are typically below the State average and our productivity is strong, we still have work to do to meet the challenges which lie ahead. To reduce costs while maintaining quality, we are in the planning stages of implementing LEAN strategies and are working careful operational analyses of our core services and service lines. We have also joined an Accountable Care Organization with Fletcher Allen, Dartmouth, and other Vermont hospitals in hopes of achieving efficiencies as we integrate clinical protocols.
The Green Mountain Care Board also noted the need for additional work over the next two months to “develop policies regarding: 1) A methodology for calculating the effect on overall health care costs of physician practice acquisitions, and for considering such acquisitions throughout the year; 2) An approach to assessing hospitals’ efforts to understand their communities’ needs and priorities; and 3) Development of a more robust hospital budget enforcement process to ensure compliance with GMCB policies.”
It is important that they have said they will work on a policy relating to the acquisition of physician practices. As the costs of an existing practice are already present within the system, those costs should not adversely impact a hospital in relation to its revenue cap should it become necessary to employ that physician in order to retain him/her within the community. I am curious about their intentions to assess hospital’s understanding of community needs. The Federal government already has a new stringent formal process, complete with substantial fines for non-compliance, to assess every hospital’s understanding of and response to community need. Duplicate regulation will not reduce costs nor improve outcomes. We do appreciate the GMCB including a budgetary factor, albeit a diminishing one, to address necessary investments in healthcare reform which are funded by the hospital.
NMC will continue to be active with the GMCB as we work together as a State to create a sustainable healthcare system. When it comes right down to it, the only way to truly bend the cost of healthcare is by reducing the demand for care. Much of this rests with the community’s accountability to live healthier. This will totally change the demand for healthcare and therefore the cost over time. I look forward to bringing members of the community together to discuss how best to tackle this!
-- Jill Bowen, NMC’s Chief Executive Officer