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Message from the CEO: Remarks to the Green Mountain Care Board

August 23, 2019

Eight hospitals last week presented their 2020 proposed budgets to the Green Mountain Care Board. I attended all the hearings and will again this coming week when the remainder of hospitals will explain their budgets in Vermont's very transparent and thorough public process. Leaders from each organization have thoughtfully described how they work to strike a balance between controlling costs, ensuring quality, planning for long-term stability and leading the way through challenges and opportunities. Before the first hearing last Monday, I had an opportunity to make some introductory remarks to the Green Mountain Care Board. Because I feel strongly about the messages I delivered, I’ve included those remarks here.
Thank you for the opportunity to address the Board today.  As always, we appreciate your willingness to hear from the hospital association as part of this important process for our state and all Vermonters.
As I have said to this Board before, hospitals are vital community organizations. They provide care all along the continuum—from perinatal to primary prevention, to complex surgery and cancer treatment, to hospice. Here in Vermont, they do this work very well, consistently putting us in the top tier of states when ranked across measures of quality, cost and access. 
At the same time, our nonprofit hospitals have demonstrated their ability to help bend the health care cost curve. Slowing the rate of growth is another way of saying that hospitals have made great strides in improving the affordability of health care for all stakeholders. Just consider that prior to the Green Mountain Care Board, net patient service revenue was growing at an historical average of nearly 7.7 percent. By comparison, over the past five years, average net patient revenue growth has been 3.6 percent.
This very real change is proof positive that Vermont’s hospitals are meeting the goal of managing inflation, even as it outpaces revenue growth.
The budgets you will hear about over the next two weeks are responsible. They reflect the resources needed to carry out our missions, serve our patients safely and effectively, continue to be steady employers and community contributors, and invest in health reform and primary prevention, among so many other things.
As they have been doing the hard work to root out costs and minimize rate increases, our hospitals are also committed to health reform, which as you know entails two major components—payment reform to align incentives with the ultimate goal, which is the best possible care of every individual patient—and delivery system reforms to focus more on keeping people healthy than waiting for them to be sick and, therefore, expensive to treat.
With nearly every hospital participating in our state’s All Payer Model through OneCare, and literally every hospital doing reform work, we are in for the long haul. To stay on the reform path and make the necessary investments and cultural changes, hospitals must be properly supported right now. As some of the current indicators illustrate, we have reached a critical point where the financial health of some hospitals is now a greater question that it has been in decades or longer. 
In addition to health reform work and investments, hospitals face a slew of challenges and cost increases, including workforce shortages and salary inflation that put substantial upward pressure on expenses.  While it may be tempting to think we can “cut our way out of this,” that is not a practical solution. Vermont hospitals have been working hard to reduce operating expense growth. Since the advent of the GMCB, they have collectively taken out 2.3 percent of the historical growth rate of operating expense. The workforce challenge alone is daunting and, when coupled with pharmaceutical cost growth and other expenses, makes it nearly impossible for NPSR to cover ongoing expenses.
Efforts to push rates below what each hospital is requesting for 2020 can create access problems for Vermonters. At some point, hospitals cannot be squeezed any further—and the result of additional pressure will be to curtail or eliminate services. For our system, this scenario also involves patients seeking and receiving care out of state, which is harmful economically and threatens our all-payer model that depends on keeping patients in the state and their service area.
Currently, six of Vermont’s hospitals are projecting negative operating margins for FY 2019 and two have budgeted losses for 2020. Our hospitals will not ever sacrifice safety and quality, which means they require full funding of their budgets to continue being the vital patient and community resources they are today.
As you know very well, we are at a critical point in health care—both here in Vermont and throughout the country. For the first time in decades, maybe ever in our field, there is bipartisan consensus—and growing agreement among providers themselves—that fee-for-service medicine is outdated and will not reduce costs or improve outcomes.
Through our all-payer model, hospitals are leading this work in Vermont. They were promised transformation funding to fuel their efforts. The vast majority of that money has not materialized and, yet, hospitals have continued to move forward, to lead the way, to invest and encourage change and move in the right direction. They are investing in healthy food, housing, transportation and building and strengthening community partnerships. They are working with RiseVT to make primary prevention a key part of their care portfolios. To date, nine hospitals are leading RiseVT campaigns serving 36 communities and more plan to come on board next year.
In Vermont, we are pioneers of reform: addressing the social determinants, moving deliberately toward value, creating true patient-centered care and continuing to serve as cornerstones of every community in our state.
We have reached a point where scaling back or altering hospital budgets will affect long term viability and alter our reform trajectory. Instead of hearing about the advances in reform and innovative programs, we will hear about hospitals abandoning reform, struggling financially and possibly even closing. Right now, our delivery system is unbalanced from a resource and expectations standpoint. We are being asked to do more with less in an environment where the resources needed to carry out transformation are outpacing financial resources available for that work.
I believe that health reform in Vermont will be successful, and perhaps even a model for elsewhere. I also know that if we expect sweeping results overnight or push too hard on the hospitals we depend on to fuel and lead this journey, the journey will not continue.
A lot has changed since last year. We had an alarming wake-up call with Springfield Hospital, where they are still plotting a path forward after serious financial decline and the closure of services including OB. The result of this is a Springfield Hospital that will look very different than it did before, and that affects the community and those nearby in significant ways.
We know that more than 100 rural hospitals have closed across the U.S. in recent years. VAHHS conducted an assessment of these closures and found that the overwhelming majority occurred in states that declined to expand Medicaid.  This startling trend offers evidence that hospitals cannot easily absorb the very real costs of short-sighted policy choices.    
The bottom line is this: without adequate cash flow, reasonable reserves and the financial room to invest and transform, hospitals will struggle to meet their missions. Their ability to lead reform will be imperiled. And their role as caregivers, employers and community contributors will be compromised.
Adjustments to these budgets may appear to rein in costs but would in reality create only an illusion of greater affordability and, unfortunately, precipitate other unintended consequences, the costs of which are borne by patients, families and communities.
On behalf of Vermont’s nonprofit hospitals, I urge this Board to approve the budgets you are about to evaluate. To put it in terms that have been observed by physicians for centuries, “First do no harm.”
Thank you again for the time and opportunity to address this Board, and for your careful consideration of hospital budgets.

Jeff Tieman

VAHHS President and CEO