Commission says hospital rates too high

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(Host) The commission that oversees hospital budgets in Vermont has proposed radical surgery to control health care costs.

The commission says hospitals should be forced to live within budgets that grow no faster than the rate of inflation.

VPR’s John Dillon reports:

(Dillon) Every August, Vermont’s Public Oversight Commission examines the budget requests from the state’s 14 hospitals.

The commission then makes recommendations to the state, which sets hospital rates. This year, hospital rates were allowed to grow an average of 6.3 %. For the last five years, rate increases have averaged 7 %.

Oversight Commission Chairman Greg Peters says that rate of growth has been too high, for too long.

(Peters) "And what we’re saying is we have to live within our means, and living within our means is staying we think within the limits of the rate of inflation for the economy at large."

(Dillon) That means hospital rates should grow no more than 3 or 4 % a year.

(Peters)" To do that in one year would be pretty tough, to ratchet them down that fast. But if you give them a goal over say a three to five year period, that we’re going to drive this down to the rate of inflation. And potentially make it the same rate increase for all hospitals – you’re all going to get the same rate increase. Learn to live with it within your budgeting process."

(Dillon) Hospitals don’t like the idea of a uniform rate increase.

(Grause) "I guess I would call that the sledgehammer approach".

(Dillon) Bea Grause is president of the Vermont Association of Hospitals and Health Systems. She says the commission’s proposal doesn’t take into account the circumstances faced by individual institutions.

(Grause) "For example in Rutland and Springfield, Medicaid and Medicare combined are the largest payers of the hospitals budget-up to 75 % of the hospital’s budgets. And those two payers don’t even pay the cost of the care that’s delivered. That would put a huge strain on those communities. So frankly, no, it wouldn’t work".

(Dillon) When the government doesn’t pay the full cost of care for those patients, the costs are shifted on to those who can pay – mainly people with private health insurance. That cost shift is then built into rates.

At the Rutland Regional Medical Center, President Tom Huebner said if Medicare and Medicaid paid its full share of costs, the hospital could reduce everyone else’s price by 30%.

Huebner says that a cap on rates to the level of inflation would have dire consequences for his institution.

(Huebner) "It would lead to reduction in workforce and closing of services. Period. The end. There’s no doubt about it."

(Dillon) But Peters, the chairman of the oversight commission, says hospitals have to make hard choices about what they can provide, and how to pay for it. He hopes the commission’s report stimulates a more detailed discussion. He says everyone will benefit if the health care system is made less expensive, and more efficient.

For VPR News, I’m John Dillon in Montpelier.

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