The University of Vermont Health Network ended its fiscal year on Sept. 30 with a loss of $90 million, despite receiving $55 million in one-time federal and state funds to cover pandemic-related expenses.
The network’s operations in Vermont — University of Vermont Medical Center, Central Vermont Medical Center, Porter Medical Center and UVM Health Network Home Health & Hospice — accounted for about 56% of the shortfall. The rest came from operating his three hospitals in New York.
The primary cause of the loss, which the network said amounted to 3.3% of its overall budget, was the increase in personnel costs, said Rick Vincent, the network’s chief financial officer.
“It’s all labor,” Vincent said. “And temporary staff is the biggest component of that.”
The organization increased salaries and provided retention bonuses to retain existing staff during a period of high workplace stress and turnover. Those additional unbudgeted expenses increased costs for Vermont operations by $44 million, Vincent said.
At the same time, like hospitals across the country, those within the UVM network have had to rely more on traveling nurses and other medical support staff to fill staffing gaps, while the rates charged by placement agencies for that temporary staff have increased. According to Vincent, the combined effect resulted in a $95 million increase in the network’s expenditures in Vermont.
The increased costs exceed the reported shortfall because the network’s 2022 budget also included a $66.5 million operating margin to be invested in building improvements, equipment purchases and training. The network held back many of these investments or, where necessary, covered them with cash reserves, Vincent said.
Health network finance executives already anticipated significant losses at their two largest hospitals this spring when they sought permission from the Green Mountain Care Board to raise rates charged to commercial insurance companies. These increases are ultimately passed on to businesses and individuals in the form of premium increases.
At that point, halfway through the 2022 fiscal year, the network projected shortfalls of $39 million at the University of Vermont Medical Center and $4 million at Central Vermont Medical Center. The regulators approved rate increases of 2.5% and 2.75% respectively.
The increased rates offset some of the losses, particularly at the network’s flagship hospital, which ended the year just $23 million in the red. However, Central Vermont Medical Center ended the year with a larger-than-expected loss of $17 million. Losses at Porter Medical Center and UVM Health Network Home Health & Hospice were $2 million and $9 million, respectively.
“The new rates have certainly helped, but not to the extent of erasing the increase in loss that we have suffered since our projection in the spring,” Vincent said.
The focus now for health network leaders, including incoming president and CEO Sunil Eappen, is to increase revenue and reduce costs to improve the bottom line in the current fiscal year.
Regulators at the Green Mountain Care Board in September approved major commercial insurance rate increases for the network’s Vermont hospitals. However, health network leaders say those increases alone will not be enough to create the $245 million swing to the positive they believe is needed to make up for delayed investments and replenish cash reserves.
Managers want to increase coordination across the network’s hospitals for some of that improvement. “We do feel like we have a solid plan in place,” Vincent said. “We are confident that we can close the gap.”
That plan is described as a series of related initiatives that network executives call the Path Forward. Among other strategies outlined in the plan, executives believe sharing electronic medical records between Vermont and New York facilities will help direct patients to where beds and diagnostic services are available. Balancing staff on a system-wide basis should also help reduce reliance on traveling nurses and other temporary medical staff, and utilize them more effectively, according to the plan.
Mike Fisher, lead health care attorney for Vermont Legal Aid, said he is encouraged that UVM Health Network’s strategy in the coming year does not include seeking an additional commercial rate increase.
“I think that’s noteworthy and I’ll commend them for that,” he said.
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