Staffing costs drove $90 million loss for UVM Health Network

After a brutal fiscal year, leaders of Vermont’s largest health care provider have a plan to dig into 2023. File photo by Glenn Russell/VTDigger

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.

Network operations in Vermont — University of Vermont Medical Center, Central Medical Center, Porter Medical Center and UVM Health Network Home Health & Hospice — accounted for about 56% of the shortfall. The rest came from operating its three hospitals in New York.

The main cause of the loss, which the network said amounted to 3.3% of its total budget, was to pay staff costs, said Rick Vincent, the network’s chief financial officer.

“It’s all work,” said Vincent. “And part-time workers are a big part of that.”

The organization increased wages and offered bonuses to keep existing workers at a time of great stress on work and profits. Those additional unplanned costs increased Vermont’s operating costs 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 mobile nurses and other medical support staff to fill staffing gaps, while the rates charged by facilities to hire those part-time workers have increased. According to Vincent, the combined effect led to a $95 million increase in network costs in Vermont.

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The increased spending is more than the reported deficit because the network’s 2022 budget also included $66.5 million in operating funds to be invested in infrastructure improvements, equipment purchases and training. The network has stopped most of these investments or, when necessary, covered them using reserves, Vincent said.

The health network’s financial executives were already anticipating big losses at their two largest hospitals this spring when they sought approval from the Green Mountain Care Board to raise rates charged by commercial insurance carriers. These increases are ultimately passed on to businesses and individuals in the form of higher premiums.

Meanwhile, during the 2022 fiscal year, the network reported a $39 million deficit at the University of Vermont Medical Center and a $4 million deficit at Central Vermont Medical Center. Regulators approved rate increases of 2.5% and 2.75%, respectively.

The increased prices offset some losses, particularly at the network’s flagship hospital, which ended the year only $23 million in the red. However, Central Vermont Medical Center ended the year with a deeper loss than expected, at $17 million. Losses at Porter Medical Center and UVM Health Network Home Health & Hospice were $2 million and $9 million, respectively.

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“The new prices have certainly helped, but not to the extent of eliminating the increase in losses that we have experienced since our spring,” said Vincent.

The focus now for the health network’s leaders, including president and CEO Sunil Eappen, is to increase revenue and reduce costs to advance the main goal in the current fiscal year.

Regulators at the Green Mountain Care Board in September approved a commercial insurance rate increase for Vermont’s network hospitals. However, health network leaders say that increase alone will not be enough to create the $245 million flexibility they believe is needed to cover the delayed investment and fill the budget.

Management is looking to increase collaboration across network hospitals with some of those improvements. “We feel we have a solid plan,” said Vincent. “We are confident that we can close the gap.”

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That program is described as a series of programs that network operators call Path Forward. Among other strategies outlined in the plan, administrators believe electronic medical record sharing between the Vermont and New York facilities will help refer patients to where beds and diagnostic services are available. System-wide staffing should also help reduce reliance on mobile nurses and other part-time medical staff, and use them more effectively, programmatically.

Mike Fisher, senior health attorney for Vermont Legal Aid, said he is pleased that UVM Health Network’s strategy for next year does not include seeking a commercial rate increase.

“I think that’s remarkable and I can commend them for that,” he said.

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