Personnel costs resulted in a $90 million loss for UVM Health Network

After a brutal fiscal year, executives at Vermont’s largest healthcare provider have a strategy to dig into 2023. File photo by Glenn Russell/VTDigger

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

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

“It’s all work,” Vincent said. “And the temporary staff is the biggest component of that.”

The organization increased salaries and provided retention bonuses to retain existing staff during a time of high workplace stress and turnover. These additional unbudgeted expenses increased the costs of Vermont operations by $44 million, Vincent said.

At the same time, like hospitals across the country, those in the UVM network have had to rely more on traveling nurses and other medical support staff to fill staffing gaps, while rates charged by agencies placement for this temporary staff have increased. According to Vincent, the combined effect resulted in a $95 million increase in network spending in Vermont.

The cost increase totals more than the reported deficit, as the network’s 2022 budget also included $66.5 million in operating margin to invest in building improvements, equipment purchases and training. The network suspended many of these investments or, when necessary, covered them using cash reserves, Vincent said.

Health network finance officials were already anticipating significant losses at their two largest hospitals this spring when they sought approval from the Green Mountain Care Board to raise the rates charged to commercial insurance companies. These increases are ultimately passed on to businesses and individuals in the form of premium hikes.

At that time, midway through fiscal 2022, the network projected deficits of $39 million at the University of Vermont Medical Center and $4 million at the Central Vermont Medical Center. Regulators approved rate increases of 2.5% and 2.75%, respectively.

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

“The new rates have certainly helped, but not to the point of erasing the increase in losses we’ve had since our spring projection,” Vincent said.

Now, health network leaders, including new president and CEO Sunil Eappen, are focused on increasing revenue and cutting costs to improve current year results.

Green Mountain Care Board regulators in September approved significant commercial insurance rate increases for Vermont hospitals in the network. However, health network executives say those increases alone won’t be enough to create the positive $245 million turnaround they say is needed to offset delayed investments and rebuild cash reserves.

Leaders are looking to increase coordination among network hospitals for some of that improvement. “We believe we have a solid plan in place,” Vincent said. “We are confident that we can close the gap.”

This plan is described as a series of related initiatives that network managers call Path Forward. Among other strategies outlined in the plan, officials believe that sharing electronic medical records between facilities in Vermont and New York will help send patients to where beds and diagnostic services are available. System-wide staff balancing should also help reduce reliance on traveling nurses and other temporary medical staff, and use them more effectively, according to the plan.

Mike Fisher, chief health care advocate for Vermont Legal Aid, said he was heartened that UVM Health Network’s strategy for the coming year did not include seeking a raise. additional commercial rates.

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

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