University of Vermont Health Network confronts negative operating margin

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University of Vermont Health Network confronts negative operating margin

Thu, 02/13/2020 - 3:39pm -- tim

UVMHN Takes Steps to Ensure Financial Stability in Face of National Challenges

Network Outlines Strategies to Preserve Access to Care, Meet Patient Needs and Support Employees

Vermont Business Magazine The University of Vermont Health Network is taking important steps to ensure financial stability in the coming years, as economic forces challenge health care providers in Vermont and around the country. Each UVM Health Network affiliate is undertaking initiatives to preserve access to care for patients and support employees while also changing the way care is delivered to focus on wellness as much as illness and to control costs.

In the quarter ending December 31, 2019, the UVM Health Network missed its budget target by 2.5 percent, or $14.6 million. The Network finished that quarter with a negative operating margin of 1.7 percent, or about $10 million. This comes after missing the margin target for last fiscal year, and the first-quarter performance means the Network may miss its margin target again this fiscal year. As a non-profit health system, the “margin” is how health care providers invest in their people, equipment and facilities, which makes meeting it critical.

“Challenges loom large for rural health care systems like ours and that is why we have come together as a health network, partnering to meet the needs of our patients, invest in our people and ensure our communities get and stay healthy,” said John R. Brumsted, MD, CEO of the UVM Health Network. “We have a good deal of work ahead to shore up our Network and we are committed to being transparent, thoughtful and diligent in our efforts.”

These local challenges are occurring against a backdrop of rural hospital closures across the country. A national survey showed that 120 rural hospitals in 31 states have closed since 2010. A 2019 study found that one in five rural hospitals were at high risk of closing unless their financial situation improved.

In Vermont, more than half of Vermont’s non-profit hospitals had negative operating margins in fiscal year 2018, and expenses were growing faster than revenues statewide.

An Iroquois Healthcare Association analysis found that more than 80 percent of upstate New York’s hospitals are operating with negative margins.

“The UVM Health Network is doing the work necessary to stabilize its financial footing and ensure we continue to provide care for our communities. Like all of the Network affiliates, Alice Hyde and CVPH have developed plans to address our financial pressures,” said Michelle LeBeau, President of Alice Hyde Medical Center and Champlain Valley Physicians Hospital. “Each plan is unique but they share common goals. Being part of the Network is the right thing for our communities.”

The UVM Health Network has identified several areas where increased costs are adding unanticipated pressures to an already thin operating margin.

Pharmaceutical costs have increased exponentially, threatening patients’ access to drug therapies and challenging providers’ abilities to provide the highest quality of care.

Meeting the needs of patients while keeping costs as low as they can be has meant absorbing increased costs, including labor costs driven by the health care workforce shortage in the region.

Each affiliate has a comprehensive plan to address financial pressures. The details of each plan are unique, but common goals include:

  • Reducing current capital spending;
  • Innovative workforce initiatives, such as at Central Vermont Medical Center, which is making it easier for employed Licensed Nursing Assistants (LNAs) to train to become Licensed Practical Nurses (LPNs) by reducing financial and time-related barriers to education;
  • Developing a network approach to pharmacy services;
  • Increasing savings through group purchasing of supplies and equipment, which has already saved more than $50 million since the Network formed.

About The University of Vermont Health Network

The University of Vermont Health Network is an academic health system that is comprised of six affiliate hospitals, a multi-specialty medical group, and a home health agency. We serve the residents of Vermont and northern New York with a shared mission: working together, we improve people’s lives.  Our partners include:

  •             The University of Vermont Medical Center 
  •             The University of Vermont Health Network Medical Group
  •             The University of Vermont Health Network – Alice Hyde Medical Center
  •             The University of Vermont Health Network – Central Vermont Medical Center
  •             The University of Vermont Health Network – Champlain Valley Physicians Hospital
  •             The University of Vermont Health Network – Elizabethtown Community Hospital
  •             The University of Vermont Health Network – Porter Medical Center
  •             The University of Vermont Health Network – Home Health & Hospice

Source: BURLINGTON – The University of Vermont Health Network 2.13.2020. PHOTO courtesy UVMMC.