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Rural Vt. & hospitals

January 20, 2019

by Emerson Lynn

The news that Springfield’s hospital isn’t paying its bills and its financial health is poor should send shudders down the spines of those interested in the health of Vermont’s rural economy. When a hospital closes the region it serves loses an economic anchor; the loss is almost impossible for a region to overcome.

We have 14 community hospitals in Vermont and in 2017, seven of the 14 lost money. Roughly the same number will have lost money in 2018. Six hospitals – Copley, Gifford, Grace Cottage, North Country, Springfield and Brattleboro Memorial – are on the watch list for the Green Mountain Care Board.

The state board has expressed concern about these hospitals’ low margins and “expenses that were outpacing their revenues.”

This is not a Vermont-only problem. It’s a rural America problem. As people leave rural areas for the city, or as their fertility rates drop, their economies suffer. As rural America continues its battle with the Amazons of the world, the suffering intensifies.

In Vermont, it’s a struggle that roughly parallels what’s going on with our schools. Hospitals and schools both have high structural costs; something that does not scale down as the population sinks. The battle becomes one of how to keep the doors open when there are fewer people to serve.

But in rural Vermont hospitals are in a league of their own. They are often the largest economic engine in their communities; are often the area’s largest employers, and they are an essential hub around which all our regions organize their economic development outreach.

Northwestern Medical Center in St. Albans, for example, generates over $106 million annually in net patient revenue, and it employs over 820 people. It’s an economic power house in Franklin County.

The hospital in Rutland generates over a quarter of a billion dollars each year. The hospital in Middlebury generates over $80 million annually; Copley generates $66 million, Brattleboro generates $78 million, Central Vermont [in Barre] generates $203 million, North Country hospital generates $77 million. The University of Vermont Medical Center generates $1.2 billion.

As a state, the health care system constitutes roughly 20 percent of our total economy. The dance is how to control the costs of the system and, at the same time, ensure its survivability, which is the issue that has been raised with Springfield.

The thought of our hospitals being at risk has not been an issue in Vermont. There has always been the assumption they would prosper, regardless. We spend more time beating them down than building them up.

But surviving here, let alone prospering, is a challenge when the rate of medical inflation nationally is between 5.5 and 6 percent and the allowed net patient revenue increase in Vermont is held at 2.7 to 3 percent. At some point, the lines intersect and whatever cash the hospital has on hand begins to slip away. The hospital in Springfield had hit that point, others are getting close.

No one was aware of Springfield’s dire circumstances when the story broke, and the news prompted both the Green Mountain Care Board and the governor’s office to react quickly, to do their due diligence and to broaden the inquiry to other hospitals, asking for pertinent information on a more regular basis.

It’s a given that one of the Green Mountain Care Board’s key responsibilities is to control health care costs, and to challenge the health care system to search for efficiencies. But if these hospitals are forced to limit their net patient revenue to half the rate of inflation they will not be able to continue as is indefinitely. Almost all our hospitals are operating on the barest of margins, which, remarkably, doesn’t produce the sense of alarm it should, which is loony.

The popular political refrain in Vermont these days is the need to protect rural Vermont; it’s the dominant political theme this legislative session. But that is a waste of breath if, at the same time, nothing is done to protect the state’s 14 community hospitals. We don’t have a rural economy to build around if we have rural hospitals too weak to function.

It’s also baffling that the health care industry which is among the largest and most important in Vermont continues to suffer in silence, cowed by politicos who are perceived as having control of their budgets, and who have the capacity to steer the political discussion in a way that negatively affects them.

Not only do they need to be their own advocates, they need to be embraced by those who have a stake in the state’s rural economic development picture. For example, there are 12 regional economic development corporations; 11 of them specifically deal with Vermont’s rural economic development scene. Perhaps they could advocate on behalf of Vermont’s hospitals. They could explain, in exacting detail, how difficult it would be for their regions to remain vibrant if their hospitals are at risk.

If the legislative leadership is serious about reviving the health of rural Vermont; its first task should be to put the state’s hospitals on a firm financial footing. That’s the message sent by the hospital in Springfield.

Originally published in the St. Albans Messenger on 1/15/19.