The Green Mountain Care Board has established targets for hospital budget increases intended to slow the growth in health care costs in Vermont over the next three years. When 2014 hospital budget year begins on October 1, 2013, Vermont hospitals will be permitted to raise their net revenues by as much as three percent per year for each of the following fiscal years (2014-2016).
In fiscal year 2014, hospitals will be eligible to spend up to an additional one percent on ‘ health reform investments.’ The amount allowed for health reform investments will decrease to 0.8 percent in 2015 and 0.6 percent in 2016. (see table 1 below). Each year, hospitals must present their budgets for approval by GMCB, which will especially scrutinize proposed health reform investments pushing budgets above three percent.
In the current fiscal year, 2013, hospital budgets rose an average of 5.8 percent, with additional investments and acquisition of physician practices driving the actual increase higher.
‘ The Board believes it is imperative that we constrain health care cost growth to more closely match growth in Vermonters’ incomes,’ said GMCB Chair Anya Rader Wallack. ‘ Under this policy, growth in spending on Vermont hospitals will be reduced and will be below national health care inflation, but will still be slightly above expected growth in the economy. We think this is a prudent approach.’ (see figure 1 below). The GMCB will not allow for routine exemptions from the growth limit.
Wallack noted that long-term cost constraint will depend on successfully changing from the prevailing payment system, which rewards hospitals and physicians for doing more procedures, to a system that rewards quality and efficiency by tracking the outcomes including patients’ overall health and satisfaction.
‘ Without changing provider payment, we cannot expect major gains,’ Wallack said.
The three percent increase amounts to about $63.7 million in spending on services provided by hospitals and hospital-based physicians in Vermont, relative to FY 13 budgeted levels. The additional one percent for health reform investments amounts to $21.2 million statewide.
The GMCB began consideration of the hospital budget limits in December and received more than 50 comments from the public on various iterations of the policy. Hospitals will be expected to submit budgets in July for GMCB approval. The Board noted the need for additional work over the next two months to develop policies regarding:
1. A methodology for calculating the effect on overall health care costs of physician practice acquisitions, and for considering such acquisitions throughout the year;
2. An approach to assessing hospitals’ efforts to understand their communities’ needs and priorities; and
3. Development of a more robust hospital budget enforcement process to ensure compliance with GMCB policies.
GMCB 2.21.2013