Feds Say Some Vermont Hospitals Were Overpaid

Sep 30, 2014

If you’ve ever had a procedure done at a hospital, you know that hospital billing can get very complicated, very quickly.

You can imagine, then, that budgeting for an entire hospital is a difficult task. Some of a hospital’s income comes from private insurers, some from the state via Medicaid reimbursement, and some from the federal government in the form of Medicare reimbursement.

Two years ago, during a routine audit at Gifford Medical Center, the federal government determined that it was overpaying some of Vermont’s hospitals. And now the federal government says it's not only changing the payments going forward, but it wants some of the money back that it already gave.  Vermont Edition talked with Joe Woodin, the CEO and President of Gifford Medical Center, which is being forced to pay back $300,000 to $400,000 a year.

“Oh, it’s absolutely devastating,” Woodin said. “For us, it’s $1.2 to 1.6 million.” Cash becomes a real problem in situations like this, he said. “All of a sudden, they will adjust a payment that they’re giving you,” he said. “If they take off $1.5 million off the table in a payment, all of a sudden you’ve got cash problems.”

Although the hospital receives upward of $30 million a year in Medicare and Medicaid, the hospital’s operating margin is much slimmer—around $1.6 million, he said.

“We run on minimal to no margins,” said Woodin. “It’s very tight, so our expenses and our costs and what we get paid is really pretty razor-thin. Something like this can wipe out an entire year’s operating margin.” The hospital uses that margin at the end of each year to invest back into programs, equipment, facilities, and staff, he said.

The $400,000 cut from the budget will come in the form of a series of non-payments that are given immediately, which places a strain on the hospital’s cash, he said.  “When you don’t have that, that’s not a good sign,” he said.

There are a number of hospitals in Vermont that have not reserved for this at all. It's causing a lot of stress in the system.

Gifford Medical Center is not the only critical access hospital in Vermont being impacted by this situation. While the Gifford has put money aside in a reserve to help it pay back this sum, other hospitals in the state have not, Woodin said. “There are a number of hospitals in Vermont that have not reserved for this at all,” he said. “It’s causing a lot of stress in the system.”

Woodin estimated the state’s total Medicare payment cut to be around seven to eight million dollars and that the brunt of the transition of health care reform in Vermont will fall on the commercial payers, who will be paying even more during the transition to a universal health care system.  “Somebody has to make up that shortfall that occurs on both the Medicaid and the Medicare side,” he said.

Woodin said he would like to see the billing process, as well as the way in which payments are issued, made simpler. “That’s actually worth a lot in terms of efficiency and saving money in Vermont and in the country,” he said. “Lot of moving parts, lot of levers. It’s been working to some degree, but then it hasn’t in others, and so that’s why we’re all trying to reform this.”

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