The Board That Sets Prices
Vermont is one of a small number of states where a government board can order a hospital to charge less. The Green Mountain Care Board reviews and approves the budgets of every hospital in the state, and its powers reach the prices hospitals charge commercially insured patients. On Monday the board approved budgets for all 14 Vermont hospitals, and the steepest order went to the state's largest provider.
The University of Vermont Medical Center in Burlington, the flagship of the UVM Health Network and the state's biggest hospital, was ordered to cut its commercial prices by 4.4 percent. The hospital had asked to keep them flat, and the board's own guidance this year called for a 1 percent reduction. On commercial revenue, the board was less aggressive, limiting UVM to a 1.3 percent reduction, roughly $1.05 billion. The budgets take effect October 1, and the vote on UVM passed 3-2.
Why the Board Went Beyond Its Own Guidance
The decisions continued an effort the board has been running for years: translating Vermont's health care affordability crisis into actual reductions in hospital prices and spending. Hospitals account for nearly half of health care spending in Vermont, compared with about one third nationally, which makes them the unavoidable focus of state cost control.
The board's guidance this year asked hospitals to reduce commercial prices and collections by 1 percent, with exceptions based on financial health, prices and access to essential services. UVM got no exception. Board member David Murman acknowledged the medical center's central role but argued the steep cut was appropriate. I do think UVM is in the most fortunate position in the state with the largest reserves, and can weather a bit of a reduction, Murman said.
The vote was not unanimous. Board chair Owen Foster, who is stepping down as chair, and outgoing member Jessica Holmes voted no.
The Hospital's Arithmetic
The tension is structural, and it predates Monday. Last year regulators cut more than $88 million from UVM Medical Center's proposed budget and ordered a steep reduction in commercial reimbursement rates. Since then the network has installed new leadership and run an extensive cost-cutting campaign, eliminating jobs and administrative expenses as it adapted to lower revenue. The board decided Monday that the hospital had further to go.
The hospital industry's representative, Mike Del Trecco of the Vermont Association of Hospitals and Health Systems, warned the board that every decision made Monday will further destabilize the financial outlook of Vermont's hospitals.
Not every voice in the state's policy world agreed with the hospital's framing. Health care advocate Mike Smith, in a memo to the board and UVM administrators this summer, recommended $50 million in additional cuts to UVM Health's proposed budget but warned that the burden must extend beyond the network, writing that UVM Health is not the entire health care system and cannot be the sole contributor to solving the state's affordability crisis.
The Exceptions Prove the Method
The board's decisions outside Burlington show a regulator calibrating rather than a blunt instrument. Northwestern Medical Center, one of the state's lower-priced hospitals, was allowed to raise commercial prices, though less than it requested, as it expands access and takes patients who might otherwise receive more expensive care elsewhere. Springfield Hospital received a small increase plus additional money for inpatient psychiatric care. Brattleboro Memorial Hospital, which reversed its decision to close its birthing center, was allowed to keep rates flat with a special allowance to help preserve obstetric care.
The pattern is deliberate: hospitals that are cheap and expanding get room, hospitals with large reserves and dominant market positions get cuts. The board's theory is that affordability is a distribution problem, and that the state's flagship hospital has been absorbing a share of the system's costs that commercial prices should no longer carry.
The Reserves Argument, on Both Sides
The vote turned on a disagreement about a balance sheet. Board member David Murman pointed to UVM Medical Center's reserves, the largest in the state, as the reason the hospital could absorb the reduction. Dr. Stephen Leffler, the network's chief executive, pointed to the same balance sheet as a warning, telling the board the medical center expects to lose roughly $75 million this year and at least that much again next year, and that the hospital's reserves are only holding up right now because of the stock market. A market correction, he said, could have huge implications for what the system is allowed and able to do over the next year or two.
Both statements can be true, which is what made the vote hard. A hospital with large reserves and a dominant market position is the safest place to test price reductions, which is the board's logic. A hospital whose reserves are invested and whose operating losses are real is also the place where a cut can compound into service reductions, which is the hospital's logic. The divided vote suggests the board itself felt the distance between the two readings.
The Ripple Into the Network
The strain at the flagship shaped the board's treatment of the rest of the system. Central Vermont Medical Center, the network's Berlin hospital, was given more breathing room in the final vote, with board members approving a slightly smaller price reduction than some had initially favored, after the chair cited the steep losses at the network's flagship hospital.
That adjustment is the regulation doing what its designers intended: treating a hospital system as a system, not as a list of separate facilities. A cut at the flagship that starves a rural affiliate would defeat the affordability purpose by degrading access, and the board's willingness to soften the Berlin order shows the calibration working. The counterargument, made by the hospital association, is that every decision made Monday will further destabilize the financial outlook of Vermont's hospitals, and that the calibration only spreads the instability more evenly.
What October 1 Actually Changes
The budgets take effect October 1, and the immediate effects are invisible to most patients. A commercial price cut changes what insurers and employers pay, and the consequences reach households through premiums and cost-sharing in future plan years, not through this year's copay. The visible effects, if the hospital's warnings are right, would arrive later: hiring freezes, deferred capital projects, service consolidation.
Hospitals can appeal the board's decisions or seek adjustments if circumstances change, and the network has signaled it may test those avenues. The next budget cycle will reveal whether the 4.4 percent order held, whether the hospital found offsets, and whether the state's largest health system treats the board's price as a fact of life or as a fight worth having again.
Primary sources
- Seven Days on the board's hospital budget orders for the vote, the cut figures and the quotes from Murman, Leffler, Del Trecco and Smith.
- NBC5 on the Green Mountain Care Board's UVM decision for the budget approval across all 14 hospitals.
- Green Mountain Care Board for the board's orders and methodology.