State's largest hospital, UVM Medical Center, asks for $204 million increase

Leaders from Vermont’s largest hospital have asked state regulators to greenlight a 6% increase in revenue from patients in the next fiscal year, or almost double the board’s ceiling of 3.5%.

If approved, the proposal would allow the University of Vermont Medical Center in Burlington to increase the amount it would be allowed to collect from patients from $1.29 billion in fiscal year 2021 to $1.5 billion in fiscal year 2022.

UVM Medical Center officials say the increased revenue would help the hospital recover from disruptions caused by Covid and hospital system failures, including a cyberattack that stalled patient services for six weeks and the closing of the Fanny Allen surgical center because of a persistent carbon monoxide contamination problem.

Though Vermont has been spared the worst of the pandemic and has not seen as many hospitalizations as other states have, Dr. John Brumsted, president and CEO of the UVM Medical Center and the University of Vermont Health Network, blamed the Covid “crisis” for the requested budget hike in a recent hearing with regulators. UVMMC is affiliated with the University of Vermont Health Network, which has six hospitals, three in Vermont and three in New York.

“It’s not hyperbole,” Brumsted told the Green Mountain Care Board last month. “And it’s not crying wolf or fire in a crowded movie theater.”

Budget numbers from the hospital, however, tell a different story. In spite of UVMMC’s misfortunes, the hospital is slated to end the year with a whopping $127 million surplus, or a 7.7% overage, the hospital’s latest financial statement shows. Nearly half of the money comes from federal coronavirus aid, as well as reimbursements for testing and vaccination clinics. Brumsted said last week the hospital is on “reasonable financial footing” because of more than $140 million federal and state aid it received in fiscal years 2020 and 2021.

“But for those dollars,” he said. “The situation financially would be very dire.”

In an interview with VTDigger last week, Brumsted could not recall the amount of coronavirus relief funds UVMMC received in FY 2021 and said he did not memorize the budget. When presented with a copy of the budget, he dismissed questions on the amount of surplus from federal funds.

The hospital is also bolstered by a healthy reserve fund. According to its filing with the Green Mountain Care Board, the hospital would have a fund balance, or reserve, of $1.2 billion, or the equivalent of cash for 184 days of operation in FY 2022.

“That’s above the national average,” said Brock Slabach, former hospital executive and current chief operating officer of the Rural National Health Association. “I want to say the national average is give or take 60 days.”

The pre-pandemic average in Vermont was 134 days worth of cash, according to Flex Monitoring, a team that includes university researchers from Maine, North Carolina and Minnesota. The FY 2022 proposals Vermont’s hospitals submitted to the board range from a high of 322 days at Northwestern Medical Center to a low of 20 days at Springfield Hospital. 

The Burlington medical center’s financial standing is even more secure because of its affiliation with the six-hospital UVM Health Network, which in FY2020 had reserves of almost $66 million, according to an audited budget statement from that year.

In an interview with VTDigger last week, Brumsted acknowledged that the hospital’s budget submission to the Green Mountain Care Board tells only part of the story. The consolidated budget statements with more information than the board requests are publicly available, he added.

“We put in absolutely everything that the regulatory process deems appropriate in the format that they tell us they want and then they ask us questions about it and we provide very transparent and open answers to their questions,” he added. “That’s the process. I’m not going to wax eloquently on whether it’s a reasonable or good process or not. It’s the process.”

Brumsted said the 6% budget increase for fiscal year 2022 is justified because it is “just sufficient to continue to facilitate our return to financial stability.”

Al Gobeille, the former chair of the Green Mountain Care Board and the chief operating officer for UVM Health Network, told regulators that without additional money, the medical center would have to cut services for patients, which would in turn raise the cost of care for Vermonters.

Access to specialist care is such a significant problem at the UVM Medical Center that the state Agency of Human Services has launched a probe into wait times. The Green Mountain Care Board and the Department of Financial Regulation later joined the inquiry. Ena Backus, the Director of Health Care Reform at the Agency of Human Services, is slated to lead and coordinate the effort.

Staff vacancies, including doctors, nurses and technicians at the hospital and clinics have resulted in patients waiting weeks and even months for appointments to see specialists, according to a recent Seven Days investigation that triggered the state inquiry.

Ongoing staffing shortages have caused serious backlogs in diagnostic imaging and longer wait times for specialist appointments, according to the investigation. In one case, a 90-year-old patient with an impacted bowel took her own life after she learned a specialist couldn’t see her for months. Another man’s prostate cancer metastasized while he waited two months for an appointment.

While the hospital has 620 beds, it’s unclear how many of these beds are staffed day-to-day. According to data from the Federal Department of Health and Human Services, in the first week of September, UVMMC reported a weekly average of 505 staffed beds. 

Temporary staff, including travel nurses and doctors, have always been a part of UVMMC, but nationwide workforce shortages have increased the numbers of travelers to cover roughly 123 full-time positions in FY 2019 to a projected 164 full-time equivalents in FY 2021. 

The FY2022 proposal suggests leadership would like to reduce use of travelers by roughly half. But to do that, the hospital would need the equivalent of 380 permanent full-time employees. This hiring push may be an impossible task amid critical health care staff shortages that have only worsened throughout the pandemic. 

In either case, UVMMC leaders have said they would step up workforce spending. According to projections, the administration would spend roughly $950 million on staffing the hospital in FY2022, up from $884 million in FY2021.

MiChele Lippy, a certified surgical technologist at UVMMC, said in a text message that vacancies have left staff scrambling to provide care.

“If it weren’t for the 32+ travelers in the operating room...patients would be handing the doctor their instruments and helping in their own procedures.”

The Green Mountain Care Board, which oversees hospital growth in Vermont, was supposed to deliberate on UVVMC’s budget proposal last Wednesday, but that meeting was canceled because the board needed additional information, executive director Susan Barrett said last week.

In slides published ahead of next week’s final vote, Green Mountain Care Board staff appear to largely agree with UVMMC. The board is expected to deliberate and set a rate for the hospital by September 15. The 6% growth proposal is slightly below the 6.4% average for Vermont’s 14 community hospitals asked for this year, but it isn’t the largest increase. Revenue requests on the FY2022 budget proposals ranged from 3% to 13.4%. However, because of its size, the Burlington hospital’s proposal would account for almost half of revenues hospitals intend to collect from patients in FY2022. The board appears to be considering steep reductions in some of these proposals.

Overall, proposed UVM Health Network revenues represent nearly two-thirds of hospital spending in Vermont. The three Vermont hospitals run by UVM Health Network -- UVM Medical Center, Central Vermont Medical Center in Berlin and Porter Medical Center in Middlebury -- hope to bring in $2 billion in payments from patients in 2022. The proposed combined income for the remaining 11 Vermont hospitals is $1.2 billion.

Crises mounted in the past year

Vermont’s largest hospital has had a rough couple of years. In late 2019, air circulation problems shut down five operating rooms at the Fanny Allen campus, which conducted about 30 outpatient surgeries a day. 

Carbon monoxide was found in the ventilation system, causing dizziness and nausea in staff. A similar issue in the building’s inpatient rehab area displaced 14 patients. After months of investigations, a brief attempt to reopen the OR and inpatient rehab unit and yet another poisoning incident in November 2020, Fanny Allen closed permanently last fall.

Hospital administration has never said how much these  investigations, attempted repairs, delayed operations and ultimate closure cost. UVMMC’s proposal indicates leadership needs healthier margins to invest in facility renovations and expansions that have been put on hold because of the pandemic.

Around the same time the Fanny Allen crisis was unfolding, an employee who was on vacation used a work laptop to open a personal email with malicious software. That triggered a cyberattack on Oct. 28, 2020, that was a direct hit to “the nervous system of the hospital,” spreading through the entire UVM Medical Center data system. It became impossible for staff to access scheduling calendars, x-rays and other scans, patient charts and other data essential to the operation of the hospital. About 300 people were furloughed in the wake of the attack, VTDigger reported.

The hospital was in disarray through December. Staff had to return to paper records at a time as UVMMC saw a surge in Covid cases.

Losses due to operational paralysis mounted to $1.5 million a day, and the hospital racked up more than $63 million in expenses 42 days into the cyberattack, Dr. Stephen Leffler told the press in December 2020. The budget proposal does not include the total cost of the cyberattack, but said the hospital’s IT staff has had to rebuild “large portions” of the hospital’s system, a process that included wiping hundreds of computers.

The cyberattack was also a major blow to staff morale, Lippy, the surgical tech, said.

“The scary thing was the number of records that were lost for scheduled appointments and surgeries and even knowing the schedule for employee work hours,” she wrote. 

The specter in the background throughout 2020 was the uncertainty of the pandemic and ramifications that impacted UVMMC’s operations. First came glove, mask and gown shortages and then the race to suspend or cancel nonurgent care to make room for a possible coronavirus surge. Patient volume, and by extension revenue, dropped dramatically.

The number of operations — typically a major revenue source for health systems — dropped from roughly 39,000 in fiscal year 2019 to more than 37,000 in FY2020. Emergency department visits decreased from 60,500 in fiscal year 2019 to 54,000 the following year. At the same time, the cost of supplies and staffing rose. Even after an almost $80 million stimulus from the state and federal government, the hospital lost roughly $4 million on operations in FY2020.

Patient admissions and emergency room visits have not returned to pre-pandemic levels in many areas, according to the hospital’s FY2021 projections, though the volume of surgeries went up to almost 38,000 procedures in the year before the pandemic to 42,000 this year.

UVMMC, however, more than made up the difference in fiscal year 2021, despite the staffing challenges, the cyberattack and the closing of Fanny Allen, the hospital’s projections show. The hospital eked out a 3.3% total operating surplus without state and federal support. Covid assistance — including reimbursements for vaccine clinics and testing — raised that margin to 7.7%, netting the hospital $127 million this year.

Brumsted said the hospital can’t abide by the board’s 3.5% growth target in 2022, which he said was arbitrary and far lower than the 5% nationwide average. 

The board appears to be considering a staff recommendation that would accept Brumsted’s 6% increase but is also suggesting UVMMC reduce the rate it was going to charge commercial insurers, effectively cutting the rate the hospital can charge commercial insurers by $5 million.

There’s another side to this equation: the burden to consumers, particularly commercial insurance enrollees, who don’t have the same cost-of-care protections state and federal regulators give Medicare and Medicaid beneficiaries.

Medical debt is already a concern for Vermonters, some of whom are already delaying or avoiding necessary care because of high health care costs, said Mike Fisher, chief health care advocate at Vermont Legal Aid.

“We’ve heard from many, many Vermonters who have just really, really, heartbreaking [medical debt stories],” Fisher added.

Hospital leadership said that burden is “a troubling reality” that cannot be avoided without substantial systematic changes to health care finance.