MIDDLEBURY — Porter Hospital officials weren’t sure how state regulators would react to their proposed fiscal year 2012 operating budget of $65.9 million. It’s a spending plan that requires less than a 2-percent increase in net revenues but necessitates a 10.3-percent rise in the rates the hospital needs to charge for procedures.
Turns out Porter officials had nothing to worry about. The Vermont Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) last month approved the plan, essentially as presented. Moreover, the Porter budget falls within the middle of the pack within the context of fiscal year 2012 spending increases pitched by 13 other hospitals throughout the state.
“I thought that we, working with board leadership and the finance committee, took pretty much a sharp-pencil approach to the budget,” Porter Medical Center President James Daily said during a recent interview.
Indeed, Vermont hospitals were able to tamp down their proposed spending increases somewhat this year by taking advantage of a series of expense exemptions allowed under Act 128, the state’s health care reform law. That law required that hospitals hold their net increase in revenues from patients below 4 percent for fiscal year 2012. But it also allowed hospitals, while calculating their budgets, to exempt revenues and expenses associated with health care reform; electronic records and information technology; new physicians practices; and “all of a portion of the provider tax.”
The provider tax is an assessment currently charged to hospitals and home health agencies. That money is then used by the state to leverage additional health care-related dollars from the federal government, which are then redistributed throughout the system. But hospitals aren’t getting back all the money they paid as a provider tax, causing large deficits that must be made up through rate increases.
Information provided by BISHCA shows that Porter’s budget, when adjusted for Act 128-related exemptions, requires a net patient revenue increase of 1.6 percent for fiscal year 2012. That compares to a high of 7.1 percent increase pitched by Grace Cottage Hospital in Townshend and a low of a 4.4-percent decrease for Mt. Ascutney Hospital in Windsor.
Overall, Vermont hospital spending in fiscal year 2012 will increase by a system-wide total of 3.8 percent, according to BISHCA Commissioner Steve Kimbell.
“Compared to the average annual system-wide increase of 7.2 percent over the span of the past five years, the rate of increase is definitely moving in the right direction,” Kimbell said in a written statement.
Daily said he is pleased that the fiscal year 2012 budget allows Porter to make some investments in information technology, physicians’ practices and other medical functions that will improve the hospital’s long-term stability. These are investments that Porter hasn’t been able to make in recent years due to budget constraints, he said.
Porter Hospital spokesman Ron Hallman said he is grateful for the flexibility that Act 128 and BISHCA allowed in crafting budgets this year.
“What the state basically did was say, ‘We are recognizing that we have imposed upon you some very substantial financial and operational burdens, and we are going to recognize them, one time, in your budget, for this year,’” Hallman said.
BUDGETING NEXT YEAR
Budgeting rules are likely to change substantially next year, officials noted. That’s because the newly appointed Green Mountain Care Board has been charged with, among other things, revamping the accounting process for health care costs. Changes, according to Kimbell, will likely include standardization of some budget components among hospitals and movement toward a global budget for the system.
“We don’t know exactly what next year is going to look like,” Hallman said. “We do know that Commissioner Kimbell and Gov. Peter Shumlin are committed to completely re-engineering the system, and they have talked about global budgeting; paying for value; paying for performance versus paying for volume. These are all concepts that have been kicked around for a long time, and I think what they are dead-set to implement some of this stuff and see what happens. But we don’t know exactly what this could mean for us.”
Officials are also unsure of how federal budget decisions might affect Porter Hospital’s budget. Lawmakers have been at odds on legislation aimed at reducing the federal budget deficit.
“Obviously, we are in the crosshairs,” Hallman said. “Medicaid and Medicare are huge programs. There is a lot of talk of entitlement reform at the federal level. It is hard for me to imagine how Medicaid and Medicare are going to escape what appears to be inevitable cuts.”
Other budgeting wild cards, according to Porter officials, will likely include potential changes to Medicaid and Medicare programs, as well as the prospect that Vermont will have to divert a big chunk of its tight resources to help pay for post-Irene repairs to roads and bridges.
“It is a wild card in terms of what our priorities are and how we are going to spend money in the future,” Daily said of Irene.
Daily said the biggest short-term challenge facing Porter Hospital is the ongoing upgrade of its information technology system and the training its staff will need to use it. Once fully implemented, the new technology — which comes at a cost of $5 million to $6 million — will allow for a seamless flow of information between the various departments and practices that make up Porter Medical Center. As an example, the new system will allow an emergency room physician to access the medical history — including recent test results and a list of the medicine they are currently taking — of a patient who shows up for treatment at midnight.
“It’s about having better coordinated care and real-time communication,” Hallman said.
It’s information that can be sent to other hospitals, too, according to Daily.
“We want the care to be more efficient and better coordinated,” he said.
Reporter John Flowers is at [email protected]