Will NMC Be Requesting A Rate Increase In Our Fiscal Year 2016 Budget?

No.  NMC’s Fiscal Year 2016 budget (covering the period from October 1, 2015 through September 30, 2016), which was recently approved by NMC’s Board of Directors and is now being submitted to the Green Mountain Care Board (GMCB) actually contains a request to reduce rates.  These are the “standard” rates that by law, NMC has to set and charge consistently to everyone, before negotiated insurance company and other discounts are applied.  This comes even with many of NMC’s current inpatient and outpatient rates already ranking at or below the State average and with NMC already having  the lowest cumulative rate increase over the past twelve  years compared to other Vermont hospitals.  We are fortunate to have seen modest increases in patient volumes in many of the local services as our community entrusts us with their care rather than having to travel for those services.  NMC also benefits from the strong work of our staff, medical staff, and management team to contain costs, eliminate waste, and reduce avoidable visits through process improvement, community education, and prevention efforts.  All these factors combine to enable NMC to submit a Fiscal Year 2016 budget that includes a decrease in rates and better aligns us with the GMCB’s mandate that growth in hospital revenue be capped at 3% per year from budget to budget.

Fiscal Years 2014 and 2015 have been strong years for NMC.  We have seen appropriate growth in many areas of utilization.  More patients are choosing to have the care they need provided here, which is a tribute to our staff who always strive to provide exceptional care. Stronger relationships with Primary Care, early detection of conditions through screenings such as mammography, and early attention to any identified health concerns are the right kind of increases in utilization as we work to improve health and reduce costs.  Since we are still mainly in a “fee for service” model of healthcare (meaning we are paid based on each patient encounter), such growth means an increase in revenue for NMC above what was budgeted.

NMC’s revenues also increased from budget to budget due to reimbursement factors.  Our Fiscal 2014 budget was prepared based on Medicare and Medicaid reimbursement rules known at that time.  Reimbursement rules from both of these programs changed in our favor after our budget was submitted and finalized.    Plus, through a Vermont Managed Care “risk based” contract that sets the stage for healthcare reform, NMC has been rewarded with revenue for our careful management of patient care to stay below contractual thresholds.  These factors provided unbudgeted revenue for NMC.  

With reimbursements and growth in utilization above what was budgeted, NMC has been exceeding the GMCB’s target of 3% growth in revenues from budget to budget.  We have met with GMCB staff and provide regular reports to GMCB.  The GMCB’s Fiscal Year 2016 budget directions ask NMC (and the other Vermont hospitals in similar situations) to shape our budget to meet the revenue cap.  Our team has worked hard to construct such a budget and it results in our ability to reduce rates while still maintaining an appropriate bottom line for future investment in our staff, technology, facilities, and prevention.  We will make our case to the GMCB in late August, showing them how we believe the various reimbursement and revenue factors should be considered and how that approach manifests itself in a budget that is right for NMC, our community, and the State.  Our proposed rate reduction is feasible and the preservation of an appropriate NMC operating margin for the future is vital and prudent.  I am proud of the effort that our team and the NMC Board have invested into the creation of this budget. 

In order for this remarkable effort to benefit our community, insurance companies must translate this reduction in rates to a reduction in premiums in our community.  Our reductions cannot simply become greater profits for insurance companies.  Nor can State or Federal programs pull back on the reimbursement improvements that contributed to make this possible.  There is still a large cost shift to employers from the underfunding of government programs.  Within our current system, that will only change if savings are passed through the insurers to companies and individuals through lower premiums and if government programs continue efforts to be better payers.  Our staff, medical staff, management team, and Board of Directors deserve a thank you for their hard work in making this possible.  I would also like to thank each of you for your continued support of local healthcare and for entrusting NMC with your care. Thank you for choosing NMC!

— Jill Berry Bowen, NMC’s Chief Executive Officer