(Host) Vermont’s hospitals want to raise revenues by $161 million – more than a 10% increase over last year.
A state commission today began its annual review of hospital budgets.
That commission learned that this year’s budget growth is the largest in several years.
VPR’s John Dillon reports:
(Dillon) The Public Oversight Commission makes annual recommendations on hospital budgets. Michael Davis is the state’s number-cruncher who leads the tour into the arcane world of health care finances.
(Davis) "We focus on the total operating revenue change. And you’ll see that’s a $160 – almost $161 million increase for the coming year. That’s a 10.6% increase."
(Dillon) Davis flashed a chart on the screen that showed changes in hospital budgets going back to 2001. The planned increase for 2008 is the first time the budget growth reached the double digits.
(Davis) "This shows the operating revenue over time. This year as you see it’s the highest it’s been in quite some time, although there have been three or four years where we have been very close to that number."
(Dillon) The main factors driving the budget increases are additional employees, salary increases and higher utilization. That means hospitals are providing more services and more people are getting health care. Davis says utilization is up 7% – the largest he’s seen in some time.
Hospitals want to raise rates about 7% to cover their increased costs. Davis said that if Medicaid and Medicare paid what the hospitals actually charge, the rate increase would be less – 4.9%.
What Davis described is the cost shift. When one payer such as Medicare underpays, the tab gets picked up by someone else – businesses and people who have health insurance.
Bea Grause is the executive director of the Vermont Association of Hospitals and Health System. She says the cost shift has a huge impact.
(Grause) "It’s about $200 million on a $1 billion base. So it’s actually 20%. of expense in the system that is not funded by either Medicare, Medicaid or people who don’t have resources to pay."
(Dillon) The cost shift is just one of the issues that frustrate members of the oversight commission.
Frank Mazur is a commission member and former lawmaker from South Burlington. He points out that overall health care expenditures care grew in Vermont from about $3 billion in 2003 to about $4.5 billion projected in 2008.
(Mazur) "My frustrations are that our cost of health care are going up dramatically in this state. They’re going up at least twice the rate of inflation and people’s salaries aren’t going up by that much. And yet there’s no mechanism that’s controlling costs. There’s no mechanism there to encourage innovation. There’s no mechanism in there to really reduce costs because the process protects the system. And I have a problem with that."
(Dillon) Individual hospitals testify before the commission later this month. The panel then provides recommendations to the commissioner of Banking, Insurance, Securities and Health care Administration. She makes a final decision on hospital budgets by mid-September.
For VPR News, I’m John Dillon in Montpelier.