NMC Commentary

Can You Give Us an Overview of NMC’s Budget Presentation?

Yes. On Tuesday, August 22, NMC is presenting our proposed Fiscal Year 2018 (FY’18) budget to the Green Mountain Care Board (GMCB) which regulates our healthcare system. For the past seven years, NMC has requested rate increases at or below the state average, including four years where we have been lowest in the state.  Two years ago, we proposed reducing rates and were approved to lower our rates by 8%.  Last year, largely in recognition that bad debt and free care were increasing in our community, we requested a 2.9% rate increase – which was denied and we were approved for a 0% rate increase.  With this history of low rate increases, the State’s Act 53 comparative data shows that NMC is consistently below the Vermont average in the prices we charge.  That is an intentional position for NMC, as we understand the challenge of high healthcare costs.  Our team works on a daily basis to reduce duplication, improve productivity, and increase efficiency to help remove costs from the system. Even with that, given a number of impactful external factors, NMC is requesting a 6% rate increase for FY’18.

NMC is actually absorbing a portion of the financial impact of the following external factors which are drivers of the need for our requested rate increase.  The change in bad debt and free care which we had forecast last year came true, now amounts to more than $2 million, and alone would require a 4.31% rate increase to cover. General inflation would require a 1.88% increase.  The necessary investment in the State’s transition to Population Health amounts to 1.5%.  Looming Federal cuts to Medicare Low Volume Adjustments would be another 1.08%.  The State’s 26% cut to Disproportionate Share payments to hospitals add 0.94% to hospital rates.  Together, the financial impact of those factors alone would require a 9.71% rate increase – and NMC is requesting less than two thirds of that.  Recently, we received a social media question about the impact of construction on our rates and explained that through years of prudent savings, strong community support, and efficiency achieved by the new spaces, NMC’s current construction is not the driving factor behind our need for a rate increase.

For three of the five members of GMCB, this is their first time through the hospital budget process, so we emphasized important points which they might not understand about NMC and our community:

  • NMC’s strategic plan is built on the Community Health Needs Assessment and the direction of healthcare reform in Vermont, with a focus on mental health & addiction; primary care; surgical & specialty care; and population health;
  • Since 2016, NMC has an average annual increase in overall ‘cost per adjusted admission’ of less than one tenth of one percent – and only one hospital in Vermont is lower;
  • NMC is targeting efficiency and financial improvements of $3 million for FY’18;
  • The GMCB seeks to keep annual growth in hospital revenue under 3.4% per year. Our budget reflects a 3.8% growth – with the additional growth coming from the appropriate transfer of medical clinics into the hospital budget from elsewhere in the system;
  • The growth of hospital services themselves at NMC in recent years has been at less than 1% per year – well below the GMCB threshold. The growth in our budget has come in on the outpatient physician practice side as we have worked to keep pace with the access our community needs to primary care and necessary and preventive medical specialties;
  • As a benefit to our community to improve population health, NMC invests more than $2 million a year in aspects of primary care, care coordination, secondary prevention, and primary prevention (including RiseVT) that are not reimbursed for within the fee-for-service medical system. NMC funds these because they are what our community needs.

To sum all of this up for the GMCB, we make the point that only through partnership can Vermont transform our healthcare system.  NMC has shown itself to be a leading and effective partner with the State in this through our work on efficiency, our investments in prevention, and our active presence in the risk-taking population health pilots. We are not alone – the price increases for Vermont’s hospitals as a whole in the last two years are the lowest in 17 years. NMC needs the budgetary latitude from GMCB to continue our enable our leading role and our investments in the challenging work of transforming Vermont’s system from fee-for-service to population health.

At our hearing with GMCB on August 22, we will discuss these points and answer their questions.  I am so pleased to work with such a dedicated team at NMC and I hope our shared vision, energy, and progress in northwestern Vermont to move our system forward shines through in our presentation.  The Green Mountain Care Board will then deliberate on all the hospitals’ budget proposals and make their rulings in September.

— Jill Berry Bowen, NMC’s Chief Executive Officer