Ask Jill
05.04.2017

Are Cuts and Shifts Reducing Hospital Resources?

Yes, these are challenging times for Vermont’s not-for-profit community hospitals.  There are a number of implemented, planned, and proposed efforts to shift expenses to hospitals and to reduce reimbursements for hospitals.  While any single change might be absorbable without impacting access to hospital-based services, combined these reach a magnitude that represents millions of dollars and calls into question what significant changes hospitals will have to make in the care we provide and the role we play in our communities.

As you know, NMC has actually reduced its rates each of the past two years despite already having charges that are consistently below average in the State.  Our emphasis on reducing duplication and eliminating avoidable costs is working.  In fact, our ‘cost per adjusted admission’ is lower in 2016 than it was in 2014. Through careful planning, years of saving for the investment, and strong community support, we have been able to implement our master facility plan construction projects to expand access to necessary preventive care and create more flexible and efficient space – without adversely impacting rates. Plus, we are leading in investing in primary prevention to engage people in embracing healthier lifestyles to prevent costly treatment longer term.  All this work is a strong reflection of the commitment from NMC’s Board, Medical Staff, and Staff to be among the leaders in bending the cost curve in healthcare.

Still, there are currently many concerning factors taking bites out of the resources hospitals use to provide access to services which do not cover their own costs – such as addiction treatment, maternity care, and prevention.  These include:

  • The revenue cap that hospitals are subject to constrains appropriate growth in care. NMC has been able to limit growth in hospital services to approximately 1% annually over last 5 years, which is less than the 3% mandated by Green Mountain Care Board (GMCB).  However, community access to physicians now employed by NMC has grown by 22% annually, which is good news for those who need care, but not recognized as good within the revue cap.
  • Reduced rates: NMC has reduced rates in each of the past two years – a total of approximately 11%.
  • Operating at a Loss: NMC is operating at a loss of approximately $1.2 million for the first 5 months of this fiscal year. We have seen a sharp increase in Bad Debt and Charity Care (a concern we had predicted prior to GMCB cuts to this budget).
  • Disproportionate Share: The Legislature is proposing to reduce payments which offset underpayment in government programs by 20% or more. 20% is a $360,000 loss for NMC.
  • Medicaid Next Gen: NMC is one of the few hospitals willing to take risk to help Vermont transition to a new population health system. NMC is at risk for losing $182,000 in the pilot. Expanding this to other payors would put NMC at risk for $2.6 million.
  • Payor Parity: Over the last year Medicaid has eliminated provider based payments that cost NMC approximately $400,000 annually. Meanwhile, there is talk the GMCB might expand this to other payors.  For BC/BS alone this would mean a $200,000 loss to NMC and for Medicare would mean a $1.1 million reduction.
  • The proposed Ambulatory Surgery Center duplicates NMC’s open capacity, adds cost to the system through their construction, and will draw off the good-paying patients. Losing colonoscopies alone could cost NMC $1 million – and going beyond that with Ortho, GYN, and General Surgeries would be even more impactful.
  • Funding for the ACO is now being required to come from hospitals and, due to a reversal on the State’s capacity to provide the required matching funds, the Federal transformational dollars for healthcare reform through the ACO are not available. This is a significant cost for NMC and a threat to the statewide expansion of primary prevention through RiseVT to bend the cost curve long term.

Amidst providing the exceptional care which earned it ‘Top 100 Rural & Community Hospitals in the United States” recognition, the NMC team continues to seek out efficiencies to help absorb these financial hits. We continue to be in active discussions with our regulators, our legislators, and others regarding the sustainable funding needed to care for our community as transform the system away from fee-for-service to population health capitated system. We are fortunate that our Board has prudently positioned NMC to weather short-term financial challenges, as that gives us some time to work through this whereas others may reach a crisis situation financially sooner. Still, now is the time for all involved to come together, consider the entire situation, and ensure that many bites do not represent irreversible harm to access and prevention.

— Jill Berry Bowen, NMC’s Chief Executive Officer