NMC Commentary

Did the Green Mountain Care Board Set the New Revenue Cap for Hospitals?

Yes. After many meetings on the topic, that NMC and the Vermont Association of Hospitals and Health Systems (VAHHS) were very active in, the Green Mountain Care Board (GMCB) has issued their Fiscal Year 2019 (FY’19) budget guidance for Vermont’s hospitals. In that ruling, the GMCB capped growth in hospital net revenues (which is different than our rates) at 2.8% for the next year, with an additional 0.4% allowed for investments in healthcare reform focused on primary care and population health. While this is above the 2.86% cap the GMCB had been considering, it falls below the 3.7% which staff of the GMCB had recommended and the 3.4% which VAHHS had requested.

Vermont’s hospitals are leading healthcare reform efforts and are making progress in bending the cost curve. As I explained in a March column, over the past seven years, hospitals have used an emphasis on efficiency and prevention to flattened the rate of growth in costs, resulting in a savings of $566 million in Fiscal Year 2017 alone compared where the trend in Fiscal Year 2010 would have taken Vermont.

The challenge for community not-for-profit hospitals like NMC is staying sustainable while bending the cost curve. We have to have the budgetary latitude to invest in innovation to allow us to achieve even greater efficiency. We have to be able to invest in primary prevention efforts, such as RiseVT, long term to improve the health of our community to reduce the demand for costly treatments. Hospitals are being called on to help invest in social determinants such as housing, transportation, child care, and food security so people are better able to live healthy lives. Capping revenues too tightly restricts the ability to make those necessary investments. Since that 3.2% total is below the 5.1% medical inflation which confronts hospitals when we purchase pharmaceuticals, medical supplies, etc., capping our revenue below inflation means we will have to cut expenses in order to stay sustainable. NMC already runs a lean, quality-focused organization and given that we benchmark ourselves at the 90th percentile in the national hospital staffing productivity system we use and given that we have a comparatively low cost-per-adjusted admission (a common measure of efficiency), further cuts to expenses are increasingly impactful. Still, our commitment continues to be to our mission of providing exceptional care for our community. We will not sacrifice quality or access in the pursuit of the revenue cap.

We discussed this crucial point last week when Robin Lunge and Maureen Usifer of the GMCB attended an NMC Board meeting along with the hospital’s Leadership Team and Medical Directors. They spoke well of NMC’s involvement in their process and our role “as a leader in population health.” As part of discussion about continued difficult decision about expense cuts, NMC Board member Kevin Manahan made a strong point that cutting access at a community hospital may make that hospital look better compared to a revenue cap, but it does not truly reduce overall costs for Vermonters, as the need for that care still exists – and local residents are then forced to travel outside their communities to get the care they need. The GMCB members spoke of recognizing that hospitals are different, needing to understand the needs of the hospitals in relation to their communities, and wanting to hear our story. They also spoke of the GMCB potentially putting additional emphasis on quality and access in their work to broaden their focus from regulation of costs. Hopefully, this will lead to the flexibility and latitude we need to care for our community appropriately while we continue to bend the cost curve within healthcare at a sustainable rate. Last week, Tom Pelham made his first visit to NMC as the newest member of the GMCB. He met with our Leadership Team and had the opportunity to learn about NMC as a collaborative organization within the accountable community for health here in northwestern Vermont. He had good questions about the need for inpatient mental health beds, our relationship with UVM Medical Center, and our efforts to contain costs.

We appreciate the willingness of the GMCB members to come to our community and hear first-hand of our commitment to quality, access, and efficiency. We need to have a collaborative relationship with them. Healthcare reform needs to be taken on in partnership between the regulators, the elected officials, Vermont’s hospitals, our providers, and our patients. Together, we can find the right pace of change to continue to meaningfully bend the cost curve without compromising quality or access. The pursuit of that is our continued commitment to you.

— Jill Berry Bowen, NMC’s Chief Executive Officer