Sequester cuts changing Vt. hospital budgets
July 07, 2013Rutland Herald
By Brent Curtis
Federal budget cuts have hit hospitals across the state, provoking a new assessment of medical spending and putting dozens of jobs on the line in an effort to preserve care while restraining costs.
Days after Rutland Regional Medical Center president Thomas Huebner said the hospital was eliminating 100 full-time-equivalent jobs — mostly due to a $4 million loss in Medicare reimbursements — administrators at other state hospitals said they too are making hard decisions about how to eliminate millions in expenses to deal with losses brought about by federal budget cuts commonly referred to as the “sequester.”
“We’re in the same boat,” said Judy Tartaglia, CEO of Central Vermont Medical Center in Berlin. “We’re losing $2 million a year. That basically wiped out our operational budget.”
Tartaglia said the federal cuts accounted for about half of a $4 million revenue drop witnessed at CVMC, which recently submitted a $150 million proposed budget to the state.
The other $2 million in losses came from an increase in costly inpatient visits and a decline in revenue-generating outpatient services — the opposite of a situation in Rutland that Huebner said contributed to part of the $4 million shortfall at RRMC.
Like the hospital in Rutland, which is using attrition and what’s expected to be a small number of actual layoffs to trim expenses from a proposed $215 million budget, the Berlin medical center is looking at ways to cut about 3 percent of its overall spending to deal with the loss of revenues.
But instead of reducing staff, Tartaglia said her hospital has assembled a team that will look for ways to save money elsewhere.
“They’re looking at all non-salary expenses, things like purchases, contracts and supplies in an effort to avoid laying off people,” she said.
“Things like service contracts on big pieces of equipment where we might be able to find a better deal on contracts locally are the types of things we’re looking at.”
In Bennington, Southwestern Vermont Medical Center is cutting personnel from its budget but not through layoffs, according to spokesman Kevin Robinson.
“We’re trying to give some incentive for people who want to move on to something new,” he said. “We’ve been asking people to voluntarily come forward if they’ve been thinking about leaving. Now might be the opportune time to do so.”
SVMC is looking to eliminate about 40 positions to deal with a roughly $3 million Medicare shortfall. While every hospital in the state saw a 2 percent reduction in its Medicare payments, the lost reimbursements have been especially hard to shoulder for hospitals like SVMC because close to two-thirds of patients at the Bennington hospital rely on Medicare.
The reductions in force are part of a cost-reduction plan started last year that Robinson said will eliminate $5 million in expenses from the hospital’s $160 million budget.
“It’s a very important step to take because we believe that in the long term, payments from Medicare are going to be going down,” he said.
Combined with health care reform efforts designed to change the focus of health services from a volume system to one that promotes wellness, Robinson said it’s clear that in the future hospitals must learn to do more with less.
“The sequester hit at a time that we’re trying to figure out how to change with requirements from the Affordable Care Act,” he said.
“Personally, I’d like to see policymakers focus on investing in health care during the process,” he added. “You don’t transform an industry by cutting it. If we’re going to be lean and mean, we need to prioritize investments.”
The only hospital contacted last week that was not looking at painful cuts in spending was Fletcher Allen Health Care in Burlington, where spokesman Mike Noble said the academic and research hospital was able to juggle the Medicare cuts with a number of other “offsetting items” in the budget.
“We’re managing our way through these times without an impact to the care we provide or layoffs,” he said. “We’ve also been able to realize a lot of efficiencies through the four health care entities that make up our system.”
But Fletcher Allen, the largest health care provider in the state, is the exception to the rule, according to Bea Grause, CEO of the Vermont Association of Hospitals and Health Systems.
“All hospitals are certainly dealing with the combined impact of the sequester and health care reform,” she aid. “Six weeks ago, Mount Ascutney (Hospital) closed their nursing home for the same reason that Rutland is looking at layoffs.”
Grause, whose organization supports the state’s hospitals in a number of ways, said the efforts by hospitals to reduce spending is something of a two-edged sword — painful in the short-term but best for the industry in the long term.
“We can’t have the same system that we’ve had. We know that. And reducing expenses is part of that,” she said. “There’s a lot of belt-tightening that’s happening in the hospital world anyway. The sequester just makes that process more challenging.”