by Hamilton E. Davis
In earlier posts, I have been critical of the Green Mountain Care Board for draining too much money out of the UVM Health Network hospitals in Burlington, Berlin and Middlebury; and equally for failing to hold the 11 non-UVM hospitals to any financial or quality standards. The Network hospitals, however, have not been alone in getting a raw deal from the Board.
Copley Hospital, a 25-bed facility in Morrisville, isn’t just getting a raw deal from the Board—it has been driven to the edge of bankruptcy by a Board whose process has been just plain irresponsible. I know that is a harsh indictment, but let’s look at the evidence.
Copley is something of a black swan in the Vermont hospital space. By black swan I mean an outlier small hospital with low costs and high quality, in sharp contrast to its non-UMV Network peers. Take a look at the chart below:
The chart sets out the 2018 Medicare per capita spending for each of Vermont’s eight Critical Access Hospitals (CAHs). Those facilities are limited to 25 beds or fewer, and their costs are subsidized by the federal government. Porter Hospital in Middlebury is the most efficient, but that is owing to a business model designed by the UVM Health Network, which is already operating at a fully reformed level. The only other CAH hospital operating at anywhere near the financial level of the UVM facilities is Copley.
Beyond controlling costs in the health care delivery system, a second imperative is to ensure that the health care Vermonters receive is high quality. The best quality care, according to consultants retained by the Green Mountain Care Board, is delivered by the UVM Health Network facilities in Burlington, Berlin in central Vermont, and Porter in Middlebury. Take a look at the next graph, which I have published many times in the past.
The consultant who drew the chart used a common quality metric called PQI (Prevention Quality Indicators), which draws on state and federal databases to compare Vermont hospitals against national peers in avoiding unnecessary care (note that the low numbers are best).
The single respectable number in that chart is the quality rating for Copley.
A possible reason for that is something called “Mansfield Orthopaedics,” which provides arguably national-class quality surgery for joint replacement, especially shoulders, knees, and hips. That makes it markedly different from the other small hospitals in Vermont, a reality that has apparently escaped the Board.
In the recent budget hearings, Copley budgeted a $3.4 million bottom line for FY2024 in a $111 million total budget. The Board cut that that margin, plus another $3 million, for a total denial of $6.4 million. That drops the hospital’s Days Cash on Hand to an average of 48 for the first nine months of 2023, far below the 125 level that the hospital’s auditors believe is a marker of financial health. Copley now is not at the edge of a financial abyss, but part way over.
These characteristics support my characterization of Copley as a black swan in our reform environment, and that the Green Mountain Care Board’s regulatory process has left it flat broke. But there is more to the story.
The CEO of Copley is a guy named Joe Woodin, who has a long history in hospital management, both large and small. In his comments to the Green Mountain Care Board at his budget hearing, he took a highly idiosyncratic stance.
He didn’t complain. He said the Board was doing a terrific job, in very difficult conditions. “Maybe we don’t give you guys enough accolades, but I really do appreciate that this is tough stuff and we’re all trying to figure it out,” he said.
The problem, he continued, is that Copley’s rates are so low now, and have been low for so long, that the hospital simply can’t catch up. Other hospitals have such higher rates that they can live with relatively modest annual increases, but he can’t.
When we get eight percent and other people get four percent, but their number is so high: Four percent of $200 versus eight of our $40 ($8 v. $3.20)—I just can’t make it work…I’m going to ask you to treat us like the UVM Network and meet with us monthly and try to help me to figure this thing out because I don’t know the answers.
Are we managing our expenses? We’re asking our people to cross train, we are doing everything possible…if this year I’m going to have a negative operating margin, next year I’m going to have a negative margin, that’ll be nine years of negative margins, except for one year when I had help from the Feds because of Covid. Nine years of negative margins doesn’t work.
Maybe there are folks out there who think we should join the UVM Network, or close the doors, you know, go into bankruptcy like Springfield. I don’t think those are good ideas…
I’m not angry, but I’d love some help…I’d love the Green Mountain Care Board or consultants you might use to understand what we are doing…
There was more in the same vein, but you get the idea. What Copley needs is a one-time fix to get its charges up to some rough parity with other hospitals in the state for the same type of services. And there is precedent for that: In the mid-teens, Dr. John Brumsted, then CEO of the UVM Health Network, asked for a one-year six percent increase, after which he pledged to deliver five years of budgets that would limit increases to the increases in inflation. He got the six and delivered the five budgets pegged to the inflation rate.
Of course, that was a different Green Mountain Care Board, chaired by Al Gobeille, and including very serious medical experts like Dr. Allan Ramsay, who had 30-plus years of experience in the hospital system. As I have asserted earlier, however, the current Green Mountain Care Board just isn’t getting it done.
Consider Board Chair Owen Foster’s comments at the time of the decision on the Copley budget:
I have a high degree of confidence in Copley. I think they are a high performer and I view the rate increase as an investment in that performance, and I do want to give additional resources to places that perform high…
The problem, as Woodin noted in his comments, is that other hospitals are so far ahead of Copley in their base charges that they never get an adequate margin of revenues over expenses. So, they are broke. If Foster is right that Copley is a high performer and doing a good job for his community, then there must be something wrong with the regulation.
We’ll deal with that in a later post.