BENNINGTON — Southwestern Vermont Medical Center is asking the Green Mountain Care Board to approve a $188,872,209 budget for fiscal 2023, a 6.35 percent increase over its 2022 approved spending plan.
The hospital, the county’s largest employer, cited the need to address a projected operating deficit — its first since 2009 — and increasing staffing costs in a presentation published on the Green Mountain Care Board’s website.
According to the presentation, which the board is scheduled to consider Monday, the hospital is projecting a $1.3 million loss for fiscal 2022. A sharp increase in budgeted expenses outpaced a smaller increase in revenue, according to the presentation.
Hospital president Tom Dee said the budget is the most daunting he’s faced in 40 years in hospital administration.
“We are concerned about it,” Dee said. “We’ve had a longstanding record here of having positive operating gains,” and shooting for positive balances between 3 and 4 percent, he said. “To have a deficit is concerning ... we work hard through plans to get into a black operating line. Right now, it’s not.”
The requested increase is larger than the hospital would like, Dee said. “But it’s the reality of what’s going across the country.” Nationally, hospitals are seeking budget increases of between 10 and 20 percent, he said.
“We’re very sensitive to rates,” Dee said. “We’re trying to keep costs as reasonable as we can for the community. But this is the cost of care people need and require.”
The budget presentation came as the Vermont Association of Hospitals and Health Systems asked the Green Mountain Care Board – the regulatory body charged with controlling healthcare costs and improving healthcare outcomes – to approve the budget increases sought by its members, to allow them to stabilize operations.
The Green Mountain Care Board is holding hearings on hospital budgets across the state this month. Southwestern Vermont Medical Center’s budget is due to be taken up Monday.
Dee said the board has looked with favor on the hospital’s budget proposals in the past, and is hoping it will do so again Monday.
“Our hope is they review our budget and see legitimacy of our budget and what we’re up against.”
SVMC’s proposed 2023 budget includes a 14.9 percent increase in salary and wage costs over the budgeted amount for 2022. That’s driven by an increase in full-time equivalent staffing needs “due to greater needs in the organization” and in clinical areas due to staffing concerns, along with planned salary increases.
Additionally, employee benefit costs are expected to increase by 10.9 percent, due to increasing health insurance claims, benefit increase cost sharing and reflecting staffing increases.
According to SVMC’s budget presentation, while operating revenues were up nearly $8 million in 2022, the hospital’s expenses rose $12.6 million. That was driven by salaries and wages projected at more than $6.3 million over the FY 22 spending plan – a 12 percent increase – as well as $4 million in indirect COVID-related costs, temporary physician costs over $1 million and more than $1.3 million attributable to inflation.
The increases came as the hospital sought to address workforce challenges by increasing minimum wages, bumping up planned pay increases, and offering incentives and shift bonuses, among other strategies.
Those increases are a reality across the healthcare industry, Dee said. But he said the hospital, in reviewing its options, thought incentives to attract and retain talent were a smarter strategy than hiring traveling nurses — which can cost twice as much or more, depending on demand and specialty.
“We’ve tried to be creative with our wage and salary structure and create internal incentives,” Dee said. “Our thought is let’s invest in our current workforce and not bring external nurses in.”
According to the budget, registered nurse vacancy rates are between 8 and 14 percent depending on the service or locations. The hospital-wide vacancy rate is averaging more than 7 percent.
The increase in revenues is attributed in part to $5 million in payments for COVID-related care – testing, vaccination and treatment – and another $2 million in emergency room, express care and imaging services.
But non COVID-related admissions remained “mainly flat,” except for increased emergency room visits and imaging services, the presentation said.
Additional expected cost increases include supplies (5.3 percent), drug costs (8.8 percent), and inflation projected at 5-7 percent — a factor the hospital said presents financial risk.
Dee said the hospital is taking a calculated risk by not incorporating the cost of another major COVID outbreak in the spending plan. In that case, the hospital would have to return to the care board for an adjustment, he said.
According to Mike Del Trecco, the Vermont Association of Hospitals and Health Systems’ interim president, continued staffing shortages, high demand for care and historic inflation are stressing the healthcare system statewide and across the country.
“This year has to be about protecting our patients and staff and continuing to be a vital resource to the community, and that means approving these requests as submitted, he said. “Any reduction will further weaken hospitals and, as we have seen over the past several years, this will compromise the delivery system, continue the workforce crisis and add greater uncertainty for Vermonters.”