by Hamilton E. Davis
When I began this series, I said that Vermont’s health care reform project was farther advanced than any similar effort in the U.S., but that it had stalled, that it now has no trajectory at all. Earlier articles sketched the barriers that have led to stasis; this concluding article will look forward to the next six months and suggest what it will take to break through to a doctor-hospital system that has high quality and sustainable costs.
We won’t have to wait long. Vermont’s 14 hospitals are putting together their budgets for Fiscal Year 2024 now, and the Green Mountain Care Board will decide by the end of March what it will accept in those proposals. The budgets are due at the Green Mountain Care Board by July 1. The Board will hold hearings on the budgets in late August and early September, and will rule on them by the middle of that month. FY2024 starts Oct. 1.
Two of the most fraught issues will take center stage within the next six weeks or so. The first step will take place in the engine rooms of the hospitals, where the Chief Financial Officers live. How much money should they ask for? What inflation rate do they expect? What services do they plan to employ? And, critically: How much money do they need to keep the doors open, and bring in a margin—an excess of revenues over expenses?
Those questions pose dramatically different challenges to separate elements in the delivery system. For the UVM Health Network, which delivers 60 percent of all the care in the state, the issue is whether they build into this budget a full or partial recovery of the money they have been shorted over the last five years, and the extent to which they begin to invest in the resources they need to flourish over the next decade in a sustainable 21st century structure.
The second fraught issue is the way the 11 non-UVM hospitals approach their budgets for FY2024. The Board has treated the “smalls” with kid gloves but despite that and despite also the federal subsidies available to eight of the smalls, their business models remain very shaky. They have trouble making any margin, and they have to worry about whether the Board will begin to raise the obvious questions about the service lines they are offering. There are no indications yet of what their response to those forces will be.
The UVM Network Conundrum
The UVM Network has not laid out its priorities publicly, but a reasonable estimate for the next decade would be a billion and a half dollars. Can a figure like that be justified? Absolutely. In fact, the array of consultants that have assessed the whole system in detail for the Green Mountain Care Board laid out the evidence for it in 2021. I’ve sketched those findings in earlier articles. A quick summary:
The Network hospitals in Middlebury, Berlin and Burlington had much lower costs in the pre-Covid era than the other hospitals in Vermont, and much, much lower costs than the rest of the country (see graph). Moreover, quality in the UVMMC is substantially better than in the other Vermont facilities (see graph). On the basis of these metrics, the consultants recommended that Vermont eliminate some 150 beds from the small community hospitals and add 60 beds to the UVM’s flagship Medical Center Hospital in Burlington.
As the UVM Network CFO Rick Vincent and his finance team close in on their final figures, they have to take the above realities into account, but they also can’t help taking into account the Green Mountain Care Board’s relentless hammering of their budget submissions over the last five years, and the Board’s refusal to mention so much as a syllable about their own consultant’s recommendations. For the UVM Network, therefore, the budget has to be shaped at least as much by political realities as the needs of their Network. A challenge for Solomon. We’ll know that decision soon.
It is important thing to note that the political factors facing the UVM Network are internal as well as external. The hostile political parameters of the Green Mountain Care Board’s attitude are clear enough, but there are huge questions about the Network’s response to those realities. To date, the response of Network senior management has been purely reactive, as we have seen. Will that change?
The ultimate decision will be up to Dr. Sunny Eappen, who took over from the retiring Dr. John Brumsted in December. One of the potentially most effective steps he could take would be to challenge Board decisions his management team believes contravene state law requirements. These laws regulate that entities receive “due process,” and be permitted to get a “fair return” on their investment.
In the wake of the Board’s decision on the Network’s current budget, the Network sent a letter to the Board making the case that it hadn’t been treated fairly because other hospitals with much more expensive budgets got rubber stamped (no due process) and that it hadn’t been allowed to recover revenues spent on historically high inflation, which it had no ability to avoid (no fair return on investment). But the Board ignored the letter, and the Network just hunkered down, as usual. The attitude seemed to be: Well, the Supreme Court would just remand the case to the Green Mountain Care Board, so what would be the point?
Actually, there would be a very important point. According to an experienced utility lawyer of my acquaintance, a remand on a health care regulation case would be an important contribution to the regulatory apparatus, and potentially of enormous benefit to a system like the UVM Network. The Vermont Supremes would not just send back the case—that would be a plain waste of time. Rather they would study the case carefully and make a judgement on the Board’s processes, including their views on how well the rights of the appellant had been protected. If the Supremes thought the GMCB performance had been faulty, the remand would lay that out. There is an extensive body of law on public utility regulation, but so far none at all on the health reform project. A UVM Network appeal would be valuable on several fronts. We have no idea, however, what Sunny might do, and in any event a direct challenge to the Green Mountain Care Board will have to wait until late summer.
Were it so inclined, the Network could mount a campaign similar to the response of the medical profession to the managed care debacle in the mid-1990s, which I described in an earlier article. The message would be that the Green Mountain Care Board is threatening the medical care the UVM Network delivers to its patients not just in the five counties of northwest Vermont, but to the whole state. Neither the Green Mountain Care Board, nor the area legislators, nor the Scott administration itself could stand up to a force like that.
Such an operation, however, would require serious political skills, and there is no evidence that the current senior management team at the UVM Network has anything resembling that. And as far as Sunny is concerned, no one knows what he would bring to such a parade. We’ll know by mid spring, but I don’t expect to see such an effort. Possible, but not likely.
Finally, the underlying disjunction between the Network and the Board suggests that the Board’s cuts to the hospital budgets could be construed as a “taking” of private property, without fair compensation, a violation of the appellant’s rights under federal law, and even the U.S. Constitution. I have no idea whether these kinds of considerations have occurred to the Network management…
The other side of the Network coin will be the budgets from the 11 smaller community hospitals. They have been protected from serious examination by the Green Mountain Care Board, as I described in an earlier article. There is no guarantee though that the Teflon treatment will continue. The small hospitals have been tiptoeing along the edge of a financial cliff for the last several years. Their problem has not been regulation, but rather the fact that their business model no longer makes any financial or medical sense.
Hence the conclusion of the Board’s consultants, which I sketched in an earlier article. A quick reminder: Dodgy medical quality, with way-too-high PQI numbers, and questionable admissions as much as high 20 to low 30 percent unjustified; overbedding (sic) by more than 150 units; recommendations to cut the size of a majority of the small community hospitals. The smalls have been protected thus far by a Green Mountain Care Board that is too weak-kneed even to talk about the issue. But the Board’s Sustainability project continues to loom over the 11 non-UVM facilities. If the Legislature were to weigh in, it could strip away the political protection and the budgets now under construction in the smalls could be blown away…
Right-sizing the 11 small hospitals could save Vermonters from $300 million to $500 million a year, which would render the doctor-hospital system “affordable” for the first time since the end of the Second World War. It is possible, but unlikely the Green Mountain Care Board will drive that process.
The Legislature could do it, however. There’s no assurance, of course, that the Legislature will force such an effort. There are some hopeful auguries: the new chair of the House Health Care Committee, Lori Houghton, an Essex Junction Democrat, clearly “gets it.” She knows perfectly well that the small network needs to be recast. Ginny Lyons is a Chittenden County Democrat who chairs the Senate Health and Welfare Committee. She has been involved in the reform project since its birth, and she may get in the game between now and mid-March. Other key players could be Sen. Jane Kitchell, the chair of Senate Appropriations; Jill Kerwinski, the House Speaker, and Philip Baruth, President Pro Tem of the Senate.
The Legislature hasn’t played a central role in the health care reform project, but it could. What’s new is that since Oct. 1 of last year the UVM Network is actually no longer a “network,” but a single integrated company with divisions (hospitals) in four counties of the state. Those counties send 62 representatives to Montpelier, 41 percent of the 150-member House. The four-county Senate delegation counts 12 members, 40 percent of the 30-member Upper Chamber.
Seventy plus legislators in a 180-member Legislature constitute a huge potential political force, one that could reverse the anti-UVM Network narrative in the state in a matter of weeks. The Network’s own political apparatus is pathetically weak, as we have seen over the last few years, but the Legislators could solve it themselves. If they were to try that, it would be evident in the next several weeks.
There are a number of lesser problems that have to be worked out, but none that reach the level of the dance between the UVM system, the Green Mountain Care Board and the Legislature. Even the various machinations involving the Scott administration and its Agency of Human Services, which may produce some additional Medicare money for UVM’s Medical Center, aren’t central to reform.
The same is true of the Vermont Blue Cross mess, and the blather that comes out of the Vermont Health Advocate, the Vermont Auditor, and VAHHS, the hospital trade group. They are all complex, and all can have some effect going this way or that, but all would resolve if the total disjunction between the UVM system, the Green Mountain Care Board, and the Legislature can be worked out. The deal will go down, or not go down, beginning in March and winding down in late summer.
The only things in play, and at risk, in that period are the health and safety of the Vermont population, the potential for saving Vermonters billions of dollars over the next decade, and the Vermont economy itself.
Seems worth watching.