State regulators will allow the University of Vermont Health Network to charge private insurers more at its two largest hospitals, but not nearly what the network claims is needed to close a $44 million budget gap.

UVM Medical Center and Central Vermont Medical Center sought an unusual midyear budget adjustment that would have allowed them to charge commercial insurance companies an additional 10 percent over the next five months. The requests came on top of the 6 percent increases the hospitals already received this year.

In a pair of 3-2 votes last Friday, the Green Mountain Care Board decided the hospitals can only raise their rates about 2.5 percent.



“I don’t think that this solves the problem,” chair Kevin Mullin said before the vote. “But it recognizes the shoes that the people at UVM are in now, given … the pressures that have been put on each and every one of our hospitals.”

In response, UVM Health Network officials said they may need to cut services.
The network threatened to defy a previous order from regulators to build a desperately needed inpatient psychiatric unit at the Central Vermont Medical Center. In 2018, regulators ordered the health network to spend a $21 million surplus to expand inpatient psych bed offerings. The pandemic delayed the project, and network officials said last fall that they expected to complete the unit in 2025.
“There is a clear need for this project,” the network said in a statement after Friday’s vote, “but we have to assess the financial viability as we review the impact of today’s decision on top of several years of losses and a fragile financial situation at CVMC.”

Regulators weren’t pleased. Mullin told Seven Days that network officials had declined to discuss the Berlin project the previous week, saying they preferred to wait until after the budget decision. Mullin said he took that as an “indirect threat.”

“It doesn’t do any good for either one of us to be taking potshots at the other through the press,” Mullin said. “But one way or the other, we’re going to see some movement on inpatient psych beds.”

The comments reflect a clear escalation of the long-simmering tensions between Vermont health care regulators and hospitals. They precede what’s expected to be one of the most expensive hospital budget cycles in the board’s 10-year history, with medical centers expected to submit double-digit rate increase requests.

Insurers, who lobbied against the midyear increases, were disappointed by the decision.

“Hospitals must be held accountable for meeting their annual budgets, balancing both cost pressures and expenses along with all of Vermont’s employers and families,” said a statement from the state’s largest insurer, Blue Cross Blue Shield of Vermont.

Health network officials said inflation and rising labor costs are to blame for the budget hole. Most of the gap — almost $40 million — was attributed to UVM Medical Center, which currently employs hundreds of expensive temporary workers.
Meanwhile, the hospital has spent about a sixth of its more than $1 billion in reserves in recent months.

Such losses should “concern every Vermont citizen,” said Al Gobeille, the health network’s executive vice president for operations. “This is a very serious moment.”

Updated, April 12, 2022.