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State of Vermont
Timothy McQuiston
2
2
2005-09-16T14:05:00Z
2005-09-16T17:13:00Z
2005-09-16T17:13:00Z
1
1532
8738
Banking & Insurance & Securit
72
20
10250
10.2625
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Clean
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Press
Release
State of Vermont...
Department of Banking, Insurance, Securities &
Health Care Administration (BISHCA)
89
Main St. Drawer 20 Montpelier, VT 05620-3101 Main Number:
802-828-3301
Commissioner: John P. Crowley
Divisions: Banking,
Insurance, Captive Insurance, Securities, and Health Care Administration
(BISHCA)
_____________________________________________________________________________________________________________________
Contact: Michael Davis, Division of
Health Care Administration; 802-828-2989
Date: Sept. 16, 2005
Commissioner
Establishes 2006 Hospital Budgets
Montpelier --The Department
of Banking, Insurance, Securities, and Health Care Administration (BISHCA)
administers the annual binding budget program for all Vermont
hospitals in an effort to contain hospital costs. The annual budget process
includes an analysis by the Departments staff and testimony by the hospitals
at public hearings held before Commissioner John Crowley and the Public
Oversight Commission. The hearing process took place over a three-day period,
on August 23, 24 and 25, 2005. The Vermont
hospital fiscal year for 2006 runs from October
1, 2005 through September
30, 2006.
When he established the FY 2006 budget levels for the hospitals, the
Commissioner reviewed the testimony received from the fourteen Vermont
hospitals during the August public hearings, the staffs analyses, the Unified
Health Care Budget forecast, and the comments of the Public Oversight Commission. In addition, the Commissioner also considered
the Health Resource Allocation Plan (HRAP) adopted by the Governor on August 2, 2005. In particular, the Commissioner noted the
seven key factors identified in the HRAP:
Demographics: the emergence
of the baby boomers into middle age
Chronic Illness: the leading
cause of illness, disability, and death, and the chief area for health
care expenditures
Prevention: a key area for
addressing health care resources
Workforce: shortages in
certain health care services
Health Care Information
Redesign: information technology needed to improve processes and outcomes
Population-based Analysis:
projecting use and need, and allocating resources accordingly
Integration of Care: improved
efficiency and effectiveness by integrating primary, specialty, physical
and mental health care.
In addition to permitting rate increases for the hospitals,
the Commissioners FY 2006 budget decisions require all of the hospitals to
work with the State over the next six to nine months to address significant
expense and revenue pressures on Vermonts
hospital health care system. Despite the lowest overall hospital spending
increase since 1997, the Commissioner determined that although the current
overall financial health of the hospitals appears stable, the future financial
picture raises the following concerns:
Difficulty in recruiting
certain health care professionals is a significant and ongoing problem representing a significant financial risk to
community hospitals.
Cost control is a challenge
for Vermonts hospitals that
are focused on retaining or adding some services while at the same time
looking for ways to limit increasing expenditures.
Key funding sources such as
Medicare, Medicaid and the Critical
Access Hospital
reimbursement program may become stressed in the next few years and the
ability to cost-shift to insurers may diminish.
Cost shifting is not a
sustainable method of financial stability. To the extent possible in Vermonts
non-profit hospital market, cost control is absolutely critical.
Professional liability
insurance costs are rising significantly at some hospitals. Responses to
this vary and a coordinated approach would be
useful.
Many hospitals are planning
significant capital spending that stresses the financial health of the
institutions.
In response to these pressures, the Commissioners budget
orders will call for Vermonts 14
non-profit hospitals to engage in activities to increase efficiency and decrease costs. In order to provide reports and studies that
will be used in next years budget decision-making process,
the hospitals will be required to do the following:
Evaluate all cost drivers,
and determine which may not be necessary to the most critical missions of
the hospitals.
Develop plans to (a) meet
physician recruitment needs, and (b) to implement contingency plans to
respond to a smaller supply of physicians and other key health care
professionals.
Explore methods to control
professional liability insurance costs, including the potential adoption
of captive insurance plans including those covering multiple institutions.
Identify and adopt best
practices throughout hospital operations and management to increase
efficiency and quality.
Develop long range financial
plans including the use of alternate health care delivery models to
provide needed services and maintain and update physical plants.
Plan for changes in health
care delivery systems such as changing technology, improved information
systems, the shifting of care from the acute care setting to the non-acute
care setting, and improved chronic disease management.
Develop strategies to
implement information technology investments.
The Department based the final budget levels on a variety of factors,
including the budget assumptions pertaining to utilization, new programs,
operating surplus, inflation, prior period budget performance, and the
individual circumstances of each hospital. Fundamental to the
Commissioners decisions is the recognition that Vermonters continue to firmly believe
the Vermont community hospital
system is integral to Vermonts
local communities and the economy of those communities.
The average 7.5% requested rate increase was comprised of individual
hospital rate increase requests that ranged from 0.0% to 11%. These rate
requests were determined by the individual hospitals as needed to meet
increasing costs and to provide operating margins.
A review of hospital testimony and staff analysis has found that the cost
increases were largely driven by utilization growth, inflationary growth
related to wages, fringe benefits, pharmaceuticals, new programs, and expanding
technology. In addition, the hospitals' testimony before the Commissioner
indicated that the hospitals are budgeting to achieve adequate operating
margins in order to: maintain and improve a financially healthy hospital system
and make capital expenditures to address technology and infrastructure plans.
The Commissioner reviewed and considered all of these factors and:
1) Accepted and established the following FY 2006 hospital budgets as they
were submitted in July: [Rate increase requests indicated in
brackets.]
Brattleboro
Memorial Hospital [8.7%]
Central Vermont
Hospital [6.4%]
Copley Hospital
[0.0%]
Fletcher Allen Health Care [8.0%]
Gifford Memorial
Hospital [3.6%]
Grace Cottage Hospital [11.0%]
Mt. Ascutney Hospital &
Health Center
[5.3%]
North Country Hospital
& Health Center
[4.8%]
Northeastern Vermont
Regional Hospital
[8.5%]
Northwestern Medical
Center [4.5%]
Porter Hospital
[5.0%]
Springfield Hospital
[8.0%]
2) Established the Rutland Regional
Medical Center
budget with a reduction in their rate request from a 9.0% to a
8.0% rate increase along with a commensurate reduction in expenditures.
This establishes an operating margin of 3.2% for the hospital.
3) Established the Southwestern Vermont
Medical Center
budget with a reduction in their rate request from a 9.8% to a
8.8% rate increase. This establishes an operating margin of 4.1% for the
hospital.
4) The Commissioner is also requiring that Rutland
Regional Medical
Center, Southwestern
Vermont Medical Center,
Central Vermont
Medical Center,
Northwestern Medical
Center, and Brattleboro
Memorial Hospital
each:
Conduct a comprehensive debt capacity and financial feasibility study and
submit the findings to the Department. The studies shall include an analysis of
the debt associated with current and projected (over the next 5 years) capital
projects and new programs, and include an analysis of projected operating revenues,
expenses, and related capital as well as utilization and related cash
flows. The studies shall describe the anticipated impact of the financial
projections on each hospital