Commentary

Al Gobeille and Rick Vincent: What’s at Stake in the UVM Health Network’s budget request

This commentary is written by Al Gobeille, the executive vice president for network operations and chief operating officer of the UVM Health Network, and Rick Vincent, the executive vice president for finance and chief financial officer of the UVM Health Network.

Recently, we presented the University of Vermont Health Network’s proposed budget for next year to our Vermont regulators, the Green Mountain Care Board (GMCB). 

Despite years of serious belt-tightening, several major forces are driving our need for a significant increase. We took this opportunity to share with the GMCB what’s at stake and explain why our budget proposal is necessary to stabilize our finances and put us on a path to sustainability.

Together, the two of us have more than three decades of experience managing and reviewing hospital budgets. From our perspective, this is the most crucial budget we’ve assembled. Actions taken now will clearly impact the future of health care in our communities. To serve our patients in the way they deserve, it’s essential we stabilize our finances to protect services, invest in staff and maintain modern facilities. 

Our network-wide operating margin — the funds left over after expenses, which we use to make those vital investments — has shrunk from 3.26% in FY17 to a projected negative margin of -3.39% at the end of this fiscal year. To cover operating expenses we’ve been forced to tap into cash reserves at a rate that puts our long-term financial sustainability at risk. This cannot continue.

We recognize we are not alone, as many organizations — health care and beyond — are struggling to balance budgets in the face of inflation, workforce shortages and supply chain disruptions. What has made our situation particularly challenging is that we went into the Covid-19 pandemic more than two years ago already on uncertain ground. Compared to other states, Vermont strictly regulates hospital budgets. Since 2017, our budgets have been constrained, growing below the rate of medical inflation and below the rate necessary to cover our expenses.

Health care is about people taking care of people. In order to not only respond to the needs of all of the patients who come to us every day, but innovate the ways in which care is provided, we need talented nurses, physicians, social workers, phlebotomists, environmental and food service workers, and many others. 

Like many business and nonprofit leaders in our community, we are seeing dramatically increasing costs in recruiting and retaining skilled people. More than 60% of our annual expenses go to pay for people — by far the single largest driving factor for our FY23 budget request. The budget we presented to the GMCB will help us retain our great employees, help many gain new skills and advance in their careers, and will help us recruit the best talent from the region and the country to fill the hundreds of vacancies we currently have.

We know increasing insurance costs are competing with other inflationary pressures everyone is dealing with — from individual households to businesses and nonprofits. Our request before the GMCB does not mean that insurance premiums will automatically increase at the same rate we’ve requested for the coming year. For years, when our commercial rates were at or near zero, commercial insurance holders still saw near double-digit premium increases. 

In fact, commercial insurers paid out less than they or we budgeted during the pandemic. This means hospital rates shouldn’t automatically translate into premium increases. In addition, we’re working vigorously to seek increases from Medicare and Medicaid to offset what we need from commercial payers. We’re very thankful that Gov. Phil Scott’s administration and specifically Agency of Human Services Secretary Jenney Samuelson have been working with us to find opportunities on these fronts.

Our goal is simple: To share with the GMCB — and the people we serve in Vermont and Northern New York — the work we’ve done to put forward the most responsible budget we could develop, while minimizing the impact on patients, protecting critical services people depend upon and continuing to make forward progress addressing access

We are honored to be leaders in this network, supporting the most talented clinicians who in turn care for the patients who need us, including the most vulnerable residents in the region. On behalf of the entire network, we appreciate — and need — the partnership and support of everyone in this region as we take on this complex work.


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