Commissioner asks FAHC to justify expansion costs

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(Host) State regulators want the Fletcher Allen hospital to explain in detail how it could cut costs on its $356 million expansion project. The state last month told Fletcher Allen that it may withdraw approval for the work unless the hospital can show that all the expenses are justified.

VPR’s John Dillon has more:

(Dillon) The price tag for the massive hospital project in Burlington has ballooned to $356 million. But the state gave formal approval to spend only about $225 million on the renovation and a new five-story parking garage.

The hospital has operated under a temporary spending authority since last November. Now the Department of Banking, Insurance, Securities and Health Care Administration has a new commissioner who’s taking a very close look at the overall costs. Commissioner John Crowley recently ordered Fletcher Allen to prove that it’s taken all steps possible to control spending. Crowley also told the hospital he’s considering withdrawing the temporary spending authority that the state granted last year. Bruce Spector is a lawyer with the department.

(Spector) “Commissioner Crowley thinks these issues around continued construction of the project, cost control on the project and having good control of the project as we move forward here are critically important. And it’s Fletcher Allen’s burden and obligation to ensure that it’s under control, cost reductions are being done.”

(Dillon) But state regulators are in a tough bind. The hospital has asked for permission to spend $120 million more, but construction is underway right now. And the hospital made clear in its reply to Crowley’s order that it can’t stop work while it waits for state approval.

In fact, the hospital wants Crowley to explicitly authorize the work. Hospital administrators say without that approval, the hospital could be in violation of state law. They warned that if the state withdrew permission, the hospital could be in default on the $150 million in bonds that were used to finance the project. Mike Noble is a hospital spokesman:

(Noble) “There are substantial costs involved if that should happen, running into millions of dollars, and many construction workers would be out of work. But again, the commissioner’s order indicated that he does not intend to shut down the project at this point. It’s clear that the commissioner wants to understand all the details associated with the Renaissance Project.”

(Dillon) The hospital says it’s ready to provide additional detail on how the money would be spent. While the hospital waits for the state’s response, both sides are gearing up for formal hearings in June. That’s when the state will do a thorough review of the $120 million in additional project costs.

For Vermont Public Radio, I’m John Dillon in Montpelier.

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