Already struggling Vermont hospitals hard hit by COVID-19 seek razor thin margins necessary to achieve stability in the face of ongoing uncertainty
Vermont Business Magazine Vermont’s nonprofit hospitals filed budget requests with the Green Mountain Care Board (GMCB) on Friday for the coming fiscal year, kicking off the annual hospital budget review process. The Vermont Association of Hospitals and Health Systems (VAHHS), which represents the system of hospitals, called these budgets “recovery budgets,” after years of financial challenges intensified by COVID-19. Hospitals experienced significant loss of revenue when they were forced to shut down elective procedures beginning in mid-March. At the same time, hospitals incurred substantial unplanned but lifesaving expenses in response to the pandemic such as retrofitting space, creating new staffing models and purchasing expensive and hard-to-find protective equipment. While extremely disruptive and costly, this work, in which hospitals collaborated with state and community partners, has been lauded as a model for the nation.
As they look to recovery, hospitals are asking regulators for increases in charges to achieve operating margins that are incredibly thin and range between 0, or breakeven, and 2.5 percent. Margins are critically important because they are dollars remaining once expenses have been covered and those dollars are reinvested in things like workforce, infrastructure and equipment to strengthen the organizations for the benefit of patients and communities.
“Each of our hospitals has a unique story to tell but collectively, this request is about ensuring all of them can continue to be there – and ready to care – every minute of every day,” said Jeff Tieman, President and CEO of VAHHS. “Our hospitals stepped up in a big way in response to COVID-19. In less than three months, hospitals lost $221 million and, even with federal grant dollars of just over $134 million, they lost ground on many fronts in the current fiscal year. Last year, more than half of our hospitals had negative operating margins. So, looking to this year, we must prioritize recovery.”
Financial strain is not new for hospitals, here in Vermont and across the country. Aging populations, loss of workforce, increased community health needs and lack of resources to maintain infrastructure are only some of the challenges of rural health care. Additionally, for years, many of our hospital rate requests were reduced in the name of cost containment. As a result, budgets have not kept pace with health care inflation or expenses tied to patient care. This practice has weakened our hospital’s finances and, when COVID-19 charged into Vermont earlier this year, hospitals were already in a precarious economic position.
“I cannot stress enough the importance of this year’s budget process for the future of our hospitals,” shared Steve Gordon, President and CEO of Brattleboro Memorial Hospital and Chair of the VAHHS Board. “We must have the resources necessary to invest in our people, equipment and supplies to be sure we are on stable ground and able to once again react and respond to whatever COVID-19 throws our way.”
“We know these are difficult times for our state’s economy and for Vermonters,” Tieman added. “That is why these budget requests are so carefully planned and come after hospitals have already taken extraordinary cost cutting measures – nearly $50 million – such as furloughs, reduction in compensation for administrators, delayed or cancelled capital projects and more to minimize rate increases to the greatest extent possible. These filings represent months of thoughtful and intense work in the face of a pandemic and we are very proud to say they represent our values and our enduring commitment to wellbeing of Vermont.”
Each hospital will present its budget to the GMCB in a series of public hearings that begin on August 18 with opening remarks from VAHHS. To learn more about VAHHS, visit VAHHS.org and to follow the budget process, visit the GMCB hospital budget review page.
Source: Montpelier, VT – GMCB 8.3.2020