Porter Hospital OK’d for 6.5% rate hike

MIDDLEBURY — The state has approved Porter Hospital’s request for a 6.5 percent rate for the fiscal year that begins this Friday. The higher rate is part of Porter’s $62,326,074 spending plan for fiscal year 2011, which represents a 5.4 percent spending increase over 2010.
The 6.5 percent rate increase exceeded regulators’ 5.9 percent cap on Vermont hospital rate increases, but Porter got the green light because its increase would have landed at just 5 percent had it not budgeted for installation of a digital record-keeping system also mandated by the state.
Because Porter’s new Health Information System/EMR digital record-keeping system was required by Act 128, known as the Blueprint for Health, the cost was deemed exempt from the rate-increase calculations set out by the Vermont Department of Banking, Insurance, Securities and Health Care Administration. Porter has budgeted $814,060 for the capital portion of the new computer system and a total of $1,190,384 for operational expenses.
Hospital officials said the budget will be tight due to increased spending that falls outside the range of the hospital’s controllable costs. In fiscal year 2010, the hospital lost $3.3 million on its contractual allowances, because of “changes in the types of patients that Porter is caring for,” said Porter spokesman Ron Hallman.
According to Hallman, the number of patients using Medicaid and Medicare rose 2 percent above the budgeted amount, and the number of patients using commercial insurance fell 4 percent below what was expected. Because commercial insurance generally pays more for hospital procedures than government-funded programs, the influx of patients on government-funded programs had a “significant impact” on this year’s budget, and that this could continue to be problematic for fiscal year 2011, Hallman said.
“Basically, we get paid better by commercial insurance than we do with Medicare and Medicaid, so, not every patient is created equal,” Hallman said.
Another significant challenge to the 2011 budget will be the increased cost of the Health Care Provider Tax. This state-imposed tax will cost the hospital $2.1 million, or 2 percent of the hospital’s total operating budget, doubling the $1,297,950 cost of the tax in 2010.
What Hallman called a “little arcane thing that has nothing to do with us providing care or getting paid for care or what we do for a business,” is, according to him, “the fastest-growing component” of Porter’s expenses.
“And that’s a big deal,” he said. “Basically, when we sat down at a table like this with blank pieces of paper and said, ‘Let’s build a budget for next year,’ we were in a $2 million hole the minute we sat down to the table. That’s not easy.”
Despite these extra expenses, which Hallman explained were out of the hands of the hospital, Porter officials are still proud of the hospital’s financial performance.
Porter’s gross revenue for the current fiscal year is coming in at 4.4 percent above budget with projected expenses 1 percent below budget, which Hallman pointed to as proof that the hospital is “doing more business, but we’re doing it more efficiently.”
He was also quick to note Porter’s performance in a report commissioned by the Legislature this past June that compared the Porter Hospital service area with 67 others throughout Vermont, Maine and New Hampshire. Porter ranked second-lowest in utilization of CT scans, lowest in the utilization of MRIs and sixth-lowest for inpatient readmission. In most other categories, Hallman said, Porter was pretty much “middle of the pack.”
The hospital is also taking more “global” actions to help “position the hospital to be a better organization in the future and to be more efficient,” said Hallman.
“These are all those sort of global, galactic things that you can’t really immediately quantify,” he added.
Among these initiatives, Hallman cited:
• The new digital records system, which he says will increase the hospital’s efficiency in the long run.
• The Vermont Hospitals Shared Services Network, or group purchasing of benefit plans with two other hospitals.
• The 340 b drug program, that Hallman says will allow Porter to offer less expensive drugs to patients and save the Vermont Medicare Program money.
Another new program that hospital is particularly proud of is the Palliative Care practice, which should save the state of Vermont money, according to Hallman.
“We’re keeping people out of the hospital and they’re dying at home,” he said. “We’re sort of patting ourselves on the back for this because it’s actually adding expense to Porter, but decreasing expenses to the system.”
Despite the 5.4 percent increase in spending projected for 2011, Hallman stands by the hospital’s new programs and expenditures, especially the new computer system.
“Sometimes you have to do things at short-term expense that have long-term gains,” he said. “And that’s what this is.
Reporter Tamara Hilmes is at [email protected].

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