Why are Vermont’s Health Care Costs Uniquely Expensive?
VHC911 – Stat v.9, April 9, 2025
Why are Vermont’s Health Care Costs Uniquely Expensive?
VHC911 is working to shed light on what is driving Vermont’s highest in the country health insurance premiums. Our coalition looks at national data to explain what’s going on. Today we continue this analysis and explain why urgent action is needed.
Early newsletters showed that Vermont’s largest hospitals are more expensive than similar hospitals in the northeast and across the country, with high costs for labor that isn’t directly related to patient care, including management & administration (M&A). Our biggest hospital, the University of Vermont Medical Center (UVMMC), is the largest driver of healthcare costs in the state and ranks among the most expensive in the country in terms of costs for non-patient care labor.
Recent newsletters have looked at costs that are directly related to patient care. The findings show an alarming 4-year trend. At UVMMC, the number of patient discharges, which includes inpatient and ambulatory care, is steadily increasing while dedicated labor for each patient discharge is decreasing. In contrast, labor for non-patient care operations including management & administration remains high (Figure 1).
Figure 1. Trends in patient discharges and labor allocation at UVMMC.
Underlying this is the revenue paid to UVMMC by insurers. Profits from commercial insurance rose steeply to $801,927,336 in 2023, which coincides with a steep increase in the premiums that Vermonters pay for insurance. At the same time, UVMMC reports a loss caring for Medicare patients which they cite as one of the causes for passing on high rates to Vermont’s commercial insurers.
Our analysis shows that the majority of academic medical centers (AMCs) across the country are able to break even or show profit on Medicare reimbursement. UVMMC’s inefficient structure means their costs per Medicare discharge are in the top 20% nationally. They are higher than Dartmouth Hitchcock, Maine Medical, Albany Medical Center as well as other comparable hospitals.
Overall, the findings paint a picture of UVMMC as a high-cost academic medical center that is top heavy with management and administration, while the number of people devoted to caring for each patient encounter is decreasing despite increasing volume ((Figure 2).
Figure 2. 2023 UVMMC performance compared to 103 academic medical centers.
When compared to other AMCs, UVMMC had the 6th lowest percentage of hospital labor costs dedicated to patient care (Figure 3). These findings raise the question whether a comparably low level of labor for each patient encounter is contributing to long wait-times for Vermonters.
Figure 3. Percentage of hospital labor costs dedicated to direct patient care.
Urgent action is needed. Regulatory approaches that cap hospital revenue have not been sufficient to reduce or contain costs. The Vermont House has advanced H.482 a bill that enhances the oversight capabilities of the Green Mountain Care Board (GMCB), and the Senate passed S.126 which would permit the GMCB to pursue hospital budgets referencing cost benchmarks, such as Medicare reimbursement rates.
In addition, the GMCB approved a settlement with the University of Vermont Health Network (UVMHN) to settle existing budget disputes. The agreement calls for UVMHN to provide a onetime investment in primary care and to settle previous over-charges to Blue Cross Blue Shield of Vermont (BCBS). They will also fund consultants and a 5-member oversight committee to develop a plan for more affordable hospital operations. This proposal is a sign of cooperation on the part of UVMMC in contrast to the actions taken last year to reduce services.
In parallel, the Agency of Human Services (AHS) is working with Vermont’s hospitals to consider how to deliver care more cost-effectively. The underlying premise is that not all of Vermont’s hospitals need to deliver all services, and that both cost and quality can be improved if some reconfigure to offer their community ambulatory and urgent care services, with transfer to larger hospitals for more complex needs. This type of care transformation has been considered for a long time in Vermont, and the push is being accelerated by the fragile financial position of many of Vermont’s smaller hospitals.
We are at an inflection point and it’s critical that state leadership commits to address hospital costs in a strategic manner. These changes are complex and will take time. However, not all change is equal, and it is essential that the GMCB takes action this year to reduce costs at UVMMC which is the state’s largest driver of healthcare costs, and to make sure that lower costs translate into lower premiums without reducing services.
Up Next
Hospitals are a vital part of a strong healthcare system. VHC911 will begin examining the cost impact of the University of Vermont Health Network (UVMHN) which includes UVMMC, 2 other hospitals in Vermont, and 3 hospitals in New York. UVMHN leadership has explained to the coalition that one of the reasons for UVMMCs high management and administration costs is that UVMHN does not have its own independent financial entity so the costs for running the network are attributed to UVMMC. The coalition will use available data to examine the performance of the network and member hospitals.
Data from this analysis comes from NASHP Hospital Cost Tool Data Set, Release Date December 20, 2024 NASHP Hospital Cost Tool.