Fletcher Allen Hospital Lowers Budget, Cites Reduced Demand In Services

Aug 28, 2013

Vermont’s largest hospital says it will reduce its proposed budget to meet the state’s guidelines to contain health care costs.

Health care regulators cheered the news. The chairman of the Green Mountain Care Board says this year’s overall budget increase for all 14 Vermont hospitals should be the lowest in years.

The Green Mountain Care Board conducts an annual hospital budget review. And prior to Wednesday’s hearing on Fletcher Allen Health Care, the Burlington institution was seen as an outlier. Its proposed budget was above the board’s target of a 4 percent increase.

But at the start of the hearing, Fletcher Allen CEO Dr. John Brumsted announced the hospital was withdrawing the proposed budget and would submit a new one to meet the state’s guideline.

Brumsted told the board that a reduction in lab tests, elective surgery and other procedures allowed the hospital to reduce its projected budget increase. He gave this example to the board:

“It’s too early to draw the bright line on cause and effect. But you know, we have a department of medicine, all specialties, well over a hundred docs, they’re collectively talking about choosing (tests) wisely,” he said. “They’ve gone in and they’ve found some lab tests that they think add no value. They’ve gone back into our standard order sets and removed those.”

The hospital budget includes about $1 billion in net patient revenue. Fletcher Allen now plans to reduce that by about $8.5 million to reflect the projected lower volume in services.

During a break in the hearing, Brumsted said he believes health care reform efforts are beginning to pay off at the state’s largest hospital.

“Health care delivery and the way people are consuming health care is changing,” he said. And it’s because of, we believe, many factors. But one of which is the reform investments that we’re making… We’re seeing the impact of being more careful with ordering tests and putting a system in place to do that.”

Al Gobeille chairs the Green Mountain Care Board, which sets hospital rates. He was cheered by the news that Fletcher Allen’s budget will now hit the board’s target.

“I think it’s great news. It shows the leadership that Fletcher Allen wants to display,” he said. “I think it’s really positive for consumers and patients.”

And Gobeille said he hopes other hospitals follow Fletcher Allen’s example. Some hospitals have proposed much smallest increases which Gobeille said should bring the overall rate of increase for all 14 hospitals to the lowest level seen in years.

“I think what Fletcher Allen did set the tone for the budget hearings. We’re serious about our guidance,” he said. “And I think the hospital CEOs have been fantastic in their acceptance of it. I think based on what we heard today we’re going to be at a 2.6 percent revenue increase for hospitals, which is half the historic low. So it’s fantastic news for patients.”

The board has set a budget target that allows hospitals a 3 percent increase to cover normal inflationary pressures. Another 1 percent increase is allowed to pay for investments in health care reform.

Fletcher Allen plans to resubmit its revised spending plan within the next few weeks.