MIDDLEBURY — State officials are reviewing a proposed fiscal year 2012 Porter Hospital operating budget of $65.9 million that would require less than a 2-percent increase in net revenues, but necessitate a 10.3-percent rise in the rates it would have to charge for procedures.
The gulf between proposed revenues and patient charges is primarily related to a series of expense exemptions allowed under Act 128, the state’s health care reform law. That law requires that hospitals next year hold their net patient revenue increases below 4 percent. But it also allows hospitals, while calculating their budgets, to exempt revenues and expenses associated with health care reform; expenses related to electronic records and information technology; new physicians practices; and “all or a portion of the provider tax.”
These exemptions were aimed at helping all state hospitals transition to a single-payer health care system the Legislature and Gov. Peter Shumlin mapped out during this past session.
“When you add it all up, you have pretty close to $2 million in carve-outs,” Porter Medical Center President James Daily said of the exemptions, which hospitals throughout the state are exercising to various degrees to help balance their respective ledgers. Porter and the other state hospitals filed their proposed spending plans by June 30, as required, for review by the Vermont Department of Banking, Insurance, Securities and Health Care Administration (BISHCA).
If BISHCA approves the Porter budget as presented, it would mean a 10-percent rise in charges for services and likely an increase in insurance premiums for those not covered under subsidy programs like Medicaid and Medicare, hospital officials acknowledged. Lawmakers conceded that such increases will represent some short-term pain as the state undertakes a system overhaul designed to make health care, and hospitals, more financially stable and efficient.
“The pay-back comes later,” said Sen. Claire Ayer, D-Weybridge, chairwoman of the Senate Health and Welfare Committee that helped craft Vermont’s health care reform law.
“We know this isn’t exactly what we expected of the numbers, but it is what we wanted in terms of investment (in the system),” Ayer added. “For now, the hospitals are doing what’s on the books, and we will stand by Porter.”
Ayer said she is confident that health reform will, “in less than 10 years,” produce “better health care for a better price.”
Steve Kimball, commissioner of BISHCA, was on vacation and could not be reached for comment as the Addison Independentwent to press on Wednesday.
In the meantime, hospitals like Porter will have to navigate some choppy financial waters.
“We are going to have to get more efficient — how much more efficient we can get is the big question, ” Daily said.
Indeed, Porter Hospital lost $2 million during the fiscal year that ended Sept. 30, 2010. Hospital officials anticipate another operating loss in the current fiscal year of nearly $750,000. These budgetary challenges contributed to the recent elimination of the hospital’s chaplaincy program and its Department of Community Health Outreach.
Financial pressures on the hospital have been numerous and well-chronicled. Porter’s share of the state’s health care provider tax has increased from $1,953,649 in 2007 to $3,074,930 in 2011, a bump of 57.4 percent.
Vermont’s Medicaid program pays an average of $34 on $100 of billed charges for those covered by the health care subsidy.
“We have been beating the drum for years that the chronic and significant underpayment of hospitals by Medicaid, exacerbated by the provider tax, and the increased number of people who have lost their private insurance and are now covered by Medicaid, would produce serious challenges for Porter Hospital,” Daily said. “When we receive an annual tax bill from the state of Vermont for more than $3.5 million with the promise of receiving only a portion of it back in DSH payments (amounting to $779,000) that is an enormous hole to fill.”
Porter Hospital Board Chairman G. Kenneth Perine said the proposed fiscal year 2012 budget represents the institution’s best effort to cover its expenses while investing in technology that will be essential to operate in the new health care landscape that is looming.
“Investing in a new electronic medical record system is a smart thing to do,” Perine said.
“We want to be good health care reform partners, we want to invest in technology to make health care more efficient and we want to have a primary care network of physician practices to ensure access to our community, and we need to produce a bottom line that keeps Porter’s doors open,” he added. “This budget is our best attempt to do this.”
Daily said the state’s hospitals will soon have to make sweeping changes in the way they operate and budget.
 “I think we’re going to talk about a three-year period of changing from a system where providers like Porter Hospital got paid more for more volume, to a system where they get paid more for keeping patients healthy and actually producing less volume,” Daily said. “It is a major re-wire of the way the whole system works.”
Reporter John Flowers is at [email protected].