Vermont Healthcare at a Crossroads
VHC911 - Stat v.20
Vermont healthcare sits at an inflection point. Eight of Vermont’s fourteen hospitals operate at a loss and across the nation, rural hospitals are closing. We have Medicaid cuts coming from Washington, and we pay the most expensive insurance premiums in the nation. The number of health insurance companies operating in our market has decreased and our largest commercial insurer, BCBSVT, is struggling to stay solvent. Our flagship medical center, the University of Vermont Medical Center (UVMMC), is unusually expensive and top heavy with management and administrative costs. Yet, too often, Vermonters lack timely access to primary care and specialty services, and many community services are underfunded, resulting in over-reliance on hospital care. These dynamics highlight the need to re-balance and restructure our health system and ease the affordability crisis.
Inflection points present opportunities for change. And key system stakeholders in Vermont are (finally) recognizing the systemic problems and beginning to pull in a similar direction. Consider just one year ago, when the Green Mountain Care Board (GMCB), the state’s regulatory body, limited the UVMMC budget growth to $64 million (less than requested). The reaction from the UVM Health Network (which controls the UVMMC budget) was to close a primary care center in Waitsfield, shutter mental health beds in Berlin, and threaten to close dialysis services in rural areas. Adding insult to injury, they sued the Green Mountain Care Board and gave their 19 top executives a cumulative $3 million in salary bonuses, which they said were unavoidable due to contract language.
What a difference one year can make. Last month, the GMCB cut UVMMC’s budget by $88 million – and there is no angry and threatening talk of cutting health services. No disparaging press releases. No threats of lawsuits. Instead, there has been a critical leadership change at the UVM Health network and an admission that a new direction is warranted.
Since January, VHC911 has published analyses demonstrating how top heavy and costly UVMMC’s operations are compared to national peers, the failure of the UVM Health network to deliver administrative cost efficiencies, the subsidization of New York hospitals by Vermont commercial rate payers, declining quality across many of our hospitals, and opportunities for administrative savings in our smaller hospitals.
The legislature acknowledged the growing crisis and mandated short- and long-term solutions. Gov. Scott weighed in, cheering on state regulators. It seems we are beginning to move beyond our typical "he said-she said" debate and to pull in the same direction.
Where we go from here?
In the immediate future, VHC911 is focused on three important elements:
The UVM Health network must demonstrate value in the form of lower costs and administrative efficiency.
The UVM Medical Center must deliver better access and quality at sustainable costs.
Vermont must regionalize essential services to preserve local access to care and keep rural hospitals open.
This is going to be hard work and some changes will be painful. But the work must be done to save our healthcare system and lower costs. Here are some questions and possible solutions we are considering:
1) How does the UVM Health Network (now rebranded as UVM Health) deliver on the value proposition it promised? One place to start is governance. Let’s increase the accountability and responsiveness of governance by allowing local hospitals boards within the network to reclaim the fiduciary and oversight role they once had before handing it to UVM Health. Strategies to trim costs and gain efficiencies should be crafted for and by each local hospital. Local communities need to know where to turn for accountability. When Central Vermont Medical Center cut mental health beds in late 2024, for example, the local board had no power in that decision. From a community and governing perspective, the structure must change. UVM Health must serve the interests of its member hospitals and not the other way around.
Further, UVM Health must streamline their bureaucracy to cut costs. UVM Health is a corporate parent to three hospitals in Vermont and three in New York. Each vice-president and press person in the network central office costs the member hospitals money. When state regulators cut UVMMC's budget they stated plainly the reason was too much money from the Medical Center flowed up to UVM Health.
Proponents of the health network argue that being part of a network delivers value greater than each individual hospital could provide on its own. To prove that hypothesis it will be vital for UVM Health to reduce its overhead and provide shared services to its member organizations at an affordable cost.
2) UVMMC, UVM Health's flagship institution, must be open, honest, innovative and deliberate in charting a new direction. After state regulators cut its operating budget by $88 million, its leadership is now compelled to make structural changes and to eliminate administrative redundancies and waste – quickly.
With UVMMC's President and Chief Operating Officer Dr. Steve Leffler maintaining his role and also stepping in as Interim CEO at UVM Health, we believe there is a good opportunity to rethink operations, reduce bloated infrastructure, and bring costs down.
The passage of Act 68 in 2025 commits Vermont to payment and delivery system reform and directs the Green Mountain Care Board to implement reference-based pricing and global budgets for all hospitals. VHC911 is optimistic that Dr. Leffler and his team will see the wisdom of adopting an initiative like the successful “Medicare Breakeven” model underway at the University Hospitals of Cleveland (UHC) system, led by Dr. Peter Pronovost. Think of it like the ”Lean” process for hospitals. At UHC, the model is reducing costs, improving quality outcomes, increasing staff retention and restructuring care delivery while aligning reimbursements with Medicare rates. This approach makes sense for Vermont since we are the 2nd oldest state and Medicare covers the bulk of senior care. And it would help advance the statutory mandate to implement reference-based pricing.
One of VHC911's earliest analysis showed that most Academic Medical Centers (77% or 82 of 106 AMCs) break even or make money on Medicare reimbursement. In 2023, UVMMC reported the 6th largest loss on Medicare - $119M annually.
We need quality and access to improve while costs come down. In the Cleveland system they are seeing exactly these outcomes, so why not employ that strategy here?
3) What about the other hospitals in Vermont? UVMMC accounts for 55% of our hospital spending, but other hospitals are equally essential to patient care and local economies. In addition to reference-based pricing, Act 68 sets the ambitious goal of establishing regional care delivery systems, fostering partnerships between healthcare organizations, and expanding access to critical local services, all while reducing costs.
All our hospitals are collaborating with the Agency of Human Services on something known as the "Regional Transformation Plan." The concept is simple: small hospitals need to coordinate to survive, potentially sharing costs for administrative, clinical, and technology operations. This hasn't gotten much press, but the process is underway, and it deserves engagement and support.
Initial work is focused on developing a tiering system of essential services. Tier 1 represents essential services that should be available in every community, like emergency services, transportation to medical facilities, primary care, mental health and substance abuse treatment, and pre- and post-natal care. Tier 2 constitutes essential regional services that may not be financially or medically feasible to provide in all localities. Some examples are services like orthopedic surgeries, labor and delivery, dialysis, minor surgeries, inpatient care and post-acute rehabilitation. Tier 3 services are those that may only be feasible to operate at a state or even neighboring state level, such as specialized trauma care and organ transplants.
Hospital leaders are now working side-by-side to explore how to share services, avoid duplication, and, ultimately, run more sustainable operations so existing hospitals can stay open and improve care. This is particularly vital to maintain access to emergencies services across our rural state.
Learn more about the Regional Transformation Plan here.
Taken together, these three planks are foundational to our healthcare future and to making the most of the opportunities this inflection point offers. VHC911 will do everything it can to keep readers informed and hold healthcare leaders accountable. The stakes are high, but without question, it's possible now to see concretely how hospitals, community caregivers, public and private resources, system planning and regulation can be integrated to substantially reduce costs and keep our healthcare system strong.
Vermont Healthcare 911 (VHC911) is a broad coalition united to combat the high cost of healthcare in Vermont. The coalition is comprised of business owners, labor leaders, healthcare providers, civic and political leaders of all parties and represents over 200,000 Vermonters.