NMC FY’20 Budget Presentation:Transforming Hospital Care

while Advancing Population Health

Green Mountain Care BoardAugust 23, 2019

Jill Berry Bowen, RN Robyn Alvis Stephanie BreaultChief Executive Officer Chief Financial Officer Director of Finance

Thank you for this opportunity to speak.A Reality Check on the Vulnerability of Hospitals

• NMC has been named one of the nation’s “Top 100 Rural & Community Hospitals” by the National Rural Health Association;

• NMC is a lean organization with an overall productivity index of 97% when benchmarked against the 75th percentile of hospitals within our national QHR peer group;

• NMC has been courageous in taking on risk, ensuring access, investing in population health, and partnering in the transformation of healthcare;

and yet …

• NMC has suffered a negative bottom line for three consecutive fiscal years;

• The current environment has made many of Vermont’s hospitals vulnerable.

The time has come to align priorities and incentives across the system.

Hospital Issues• Wage pressures and medical inflation costs exceeding allowed revenue cap,

creating 3 consecutive years of operating losses;

• Recruitment and retention of top talent in times of shortage and uncertainty;

• Pace of change is exhausting for our staff;

• Complicated transition to an integrated electronic health record across the organization;

• Aging facilities that need to be updated for quality, efficiency, safety, & privacy;

• Aging population who still need chronic care, even with prevention focus;

• Lack of reimbursement for prevention services;

• Ensuring access to care through employment of physicians creates the illusion that hospital costs are rising;

Areas of Risk & Opportunity• Our Community Health Needs Assessment calls on us to address mental

health, addiction, obesity, suicide, domestic/sexual assault, food insecurity, and tobacco/vaping;

• Advancing surgical optimization and Lifestyle health coaching while RiseVT works in the community on healthy culture, policy, and infrastructure;

• For-Profit Ambulatory Surgery Center’s direct negative impact;

• Shifting from 30% capitation to 70% capitation by 2022;

• Revenue cap inhibiting financial health and necessary future capital;

• Achieving an integrated electronic health record across the organization;

• Collaboration with Health Care Advocate on Financial Assistance policies;

• Partner relationships take thoughtful dialogue and evolution;

Areas of Risk & Opportunity• Redefining our Future: Strategic planning at NMC by our Board, Medical

Leaders, and Management with input from our staff, our community, and industry experts to identify what service lines we invest in, maintain, change, or divest;

• Advancement of Technology into new care practices (telehealth);

• Violation of bond covenant related to debt service coverage ratio;

• Fluctuations in operations creating instability of financial forecasts, including a variance from our originally submitted FY'19 projections and FY'20 budget;

• The opportunity to align the visions and actions of the Green Mountain Care Board, the Legislature, the payors, and the healthcare providers to create a healthier future for all Vermonters – and giving hospitals the budgetary latitude needed if we are expected to fund and fuel that future.

RiseVT, now a statewide movement to embrace healthy lifestyles, began in our community with NMC as a founder.

Our team is partnering with our schools, employers, and municipalities on policies, infrastructure, and culture so the healthy choice is the easy choice.

We are hitting our short-term engagement targets on our way to our mid-term goals of behavior change. This fall, we will conduct our 2nd measurement study with our schools regarding our long-term goal of reducing childhood obesity.

Sampling of RiseVT’sEvidence-Based Impact in 2019:

• Maple Run School District’s WellSat score of strength and comprehension of wellness policy revolutionized from 33% to 82%;

• RiseVT engaged 1600+ children in 100+ classrooms across every school district, integrating wellness into curriculum;

• 20 municipal healthy infrastructure/policy projects advanced in 2019, including: sidewalks, playgrounds, smoke-free parks, economic development through recreation, trails, and expanded Farmers’ Markets;

• The Worksite Wellness Community Coalition has grown to 42 active employers who are improving policies and engaging employees in healthier habits to reduce healthcare costs;

• NMC is a Gold-level RiseVT worksite and our HealthyU program shows that high risk employees who are health coached have a $3,288-a-year lower per person cost.

Net Patient Revenue & Fixed Prospective Payments

FY'2019 Budgeted NPR $112,773,980

Dermatology Physician Transfer Out

($711,015)

Total FY'2019 Baseline NPR

$112,062,965

3.5% Allowable NPR Growth

$3,922,268

Primary Care Transfer In $941,346

FY'2020 Budgeted NPR $116,926,579

NMC’s rate increase has 2 components:

• 7.63% increase on hospital-based services

• 0% increase on physician professional services

Results in an overall rate increase of 5.9% that will be applied to all payors

Financial Health – Key Metrics

Rate Correction

Chart1

201320132013

201420142014

201520152015

201620162016

201720172017

201820182018

2019 Projected2019 Projected2019 Projected

2020 Budget2020 Budget2020 Budget

NPR Budget

NPR Actual

Operating Margin

Net Patient Revenue and Operating Margin

83550542

89180074

0.0778

87759305

91165412

0.0778

90795885

97798763

0.0962

98185690

99895760

0.0106

101935936

101110424

-0.0038

106128223

103317768

-0.034

112773980

108246154

-0.06

116926579

-0.002

Out of State Rev

PayerVTOut of StateTotal

Medicare67,229,694553,85567,783,5490.0081709354

Medicaid41,465,194101,29941,566,4930.002437035

Commercial/Self/Other74,916,2901,593,29476,509,5840.0208247636

Out of State Rev

VT

Out of State

553,855

Financial Health – Key Metrics

Note – Includes ED Modernization Project CON

Chart1

20162016

20172017

20182018

2019 Projection2019 Projection

2020 Budget2020 Budget

2021 Projection2021 Projection

Column1

S&P 2018 Median A Rated Hospital

Days Cash on Hand

351

257.5

331

257.5

300

257.5

257

257.5

244

257.5

218

258

Sheet1

Column1S&P 2018 Median A Rated Hospital

2016351258

2017331258

2018300258

2019 Projection257258

2020 Budget244258

2021 Projection218258

Financial Health – Key Metrics

Average Annual Hospital Based Growth Rate – 4.3%

Average Annual Physician Practice Growth Rate – 13.8%

• Represents NMC investment in access and the transition to a system focused on wellness and prevention. NMC’s FY'20 budget includes direct expenses for Primary Care, Pediatrics, Urgent Care, Community Case Management, Lifestyle Medicine including Health Coaching, RiseVT, and Addiction Services of over $12.5 million.

Chart1

00

00

00

00

00

00

00

Hospital Based

Physician Practice - Access

Expense Growth by Source

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Sheet1

2015$ 1.00Expense Type2018 BudgetPhysician Transfers2019 BudgetOther ChangesPercent Change

2016$ 0.92-8.0%Total Wages51,560,4333,113,60556,382,0751,708,0373.31%

2017$ 0.920.0%Other Expenses57,727,898826,72860,159,6371,605,0112.78%

2018$ 0.953.5%Total Expenses109,288,3313,940,333116,541,7123,313,0483.03%

2019$ 0.972.0%

2020$ 1.035.9%6.64%

Hospital BasedPhysician Practice - AccessTotalPhys GrowthHosp GrowthTotal Growth

FY201477,198,60410,663,31387861917

FY201581,551,85511,947,6639349951812.0%5.6%6.4%

FY201687,279,85015,039,85610231970625.9%7.0%9.4%

FY201790,849,52416,834,26710768379111.9%4.1%5.2%

FY201893,763,35519,610,49711337385216.5%3.2%5.3%

FY2019 Proj98,412,49621,373,5601197860569.0%5.0%5.7%

FY2020 Bud99,227,09423,161,1181223882128.4%0.8%2.2%

Cumulative Avg13.8%4.3%5.7%

Sheet1

FY2014FY2014

FY2015FY2015

FY2016FY2016

FY2017FY2017

FY2018FY2018

FY2019 ProjFY2019 Proj

FY2020 BudFY2020 Bud

Hospital Based

Physician Practice - Access

Expense Growth by Source

77198604

10663313

81551855

11947663

87279850

15039856

90849524

16834267

93763355

19610497

98412496

21373560

99227094

23161118

Financial Health – Key Metrics

Financial Overview

Financial Overview

Cost Drivers & Cost Containment

New expenses have been identified related to the Meditech Ambulatory implementation.

These difference between the originally submitted FY'20 budget and the revised FY'20 budget are as follows:

Clinical Staff to Support Providers – $581,592

Health Information Management Coding Staff – $352,302

Information Technology Support – $78,544

Interfaces, Licenses, and Support Fees – $248,000

All Other – $262,264

Total new expenses - $1,522,702

Cost Drivers & Cost ContainmentsNMC’s Operational Improvement Plan --Significant Cost Reductions in FY’19 & FY’20 include:

Financial Overview – FY'2019

Breakdown of $9.5 million net operating income unfavorable variance:• Meditech Ambulatory Implementation on May 1 (NPR) – $3.3 million• Self-insured Health Claims (Expense) – $1.7 million• Surgeon away on Family Medical Leave (NPR) – $1.2 million• Locum Physicians, Interim Management/Consulting (Expense) – $1.3 million

As of April 2019, NMC was on track to achieve our Net Patient Revenue for FY'19.

Capital Budget PlansCertificates of Need Status:

• NMC recently closed the Medical Office Building CON;

• NMC anticipates closing the Private Inpatient Rooms & Medical Clinics CON in November of 2019;

• NMC has been granted expedited review for our Emergency Department Modernization Project – Total Cost $7,616,215

Capital Budget Plans

Long Range Financial Outlook

These margins reflect what would happen if NMC did nothing to improve them. They are not acceptable or sustainable. Through strategic planning with our Board, Leadership, and Medical Staff leaders, we are redefining our mix of programs and services to ensure sustainability.

Historical Compliance with Budget Orders

3.20%

4.64%5.90%

2.39%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Requested

AverageAnnualIncrease

Range of Vermont Hospitals

Median

NMC

Historical Compliance with Budget Orders

Historical Compliance with Budget Orders

Chart1

Copley HospitalCopley Hospital

Northwestern Medical CenterNorthwestern Medical Center

Average of Remaining HospitalsAverage of Remaining Hospitals

Current Price of Procedure with $1.00 Price in FY2015

FY2020 Price of Procedure with $1.00 Price in FY2015

Price Comparison - FY'2015 to Present

0.9332348256

1.0246918385

0.971244

1.028547396

1.1518083826

1.1825553111

Cost per Adj Admit

Act 2016Act 2017Proj 2017Bud 2018Bud2018 RankGrowth Rate

COPLEY HOSPITAL11,057.2812,007.8013,152.5513,511.2836.909%

GIFFORD MEDICAL CENTER10,386.2010,611.0710,892.6811,386.6673.113%

GRACE COTTAGE HOSPITAL7,513.517,367.208,083.708,211.66123.006%

MT. ASCUTNEY HOSPITAL & HEALTH CTR6,272.887,258.617,501.647,666.89136.918%

NORTH COUNTRY HOSPITAL8,655.288,963.089,527.369,688.2093.829%

NORTHEASTERN VT REGIONAL HOSPITAL12,262.6410,946.9211,794.2412,217.105-0.124%

PORTER MEDICAL CENTER11,791.0612,172.3912,755.3712,843.7742.892%

SPRINGFIELD HOSPITAL6,157.775,636.026,068.946,860.55143.668%

BRATTLEBORO MEMORIAL HOSPITAL9,021.419,285.059,590.7810,600.8785.525%

NORTHWESTERN MEDICAL CENTER8,821.628,739.268,797.778,843.50110.083%

CENTRAL VERMONT MEDICAL CENTER11,217.2511,404.8111,393.3411,581.2561.070%

RUTLAND REGIONAL MEDICAL CENTER13,551.7313,610.8914,792.6215,254.0924.023%

SOUTHWESTERN VT MEDICAL CENTER9,338.998,705.119,294.449,421.82100.295%

THE UNIVERSITY OF VERMONT MEDICAL CENTER17,035.7716,897.0819,020.5119,604.9114.794%

Median9,8639,94810,24210,994

Maximum17,03616,89719,02119,605

NMC8,8228,7398,7988,843

Minimum6,1585,6366,0696,861

Average Annual Growth Rate

NMC0.083%

Median3.686%

Median9,862.609,948.0610,241.7310,993.77

Range of Vermont Hospitals10,878.0011,261.0612,951.5712,744.37

NMC8,821.628,739.268,797.778,843.50

Minimum6,157.775,636.026,068.946,860.55

Hidden Base6,157.775,636.026,068.946,860.55

Cost per Adj Admit

Hidden Base

Minimum

Median

NMC

Range of Vermont Hospitals

FTEs per 100 Adj Disch

Act 2016Act 2017Proj 2017Bud 2018Bud2018 RankGrowth Rate

COPLEY HOSPITAL6.196.396.816.8843.581%

GIFFORD MEDICAL CENTER6.816.215.875.768-5.444%

GRACE COTTAGE HOSPITAL5.315.125.595.7092.385%

MT. ASCUTNEY HOSPITAL & HEALTH CTR3.924.514.654.41134.036%

NORTH COUNTRY HOSPITAL4.754.755.185.28103.572%

NORTHEASTERN VT REGIONAL HOSPITAL7.396.156.536.646-3.514%

PORTER MEDICAL CENTER6.666.336.587.0431.880%

SPRINGFIELD HOSPITAL3.303.073.303.59142.867%

BRATTLEBORO MEMORIAL HOSPITAL4.865.135.135.9977.211%

NORTHWESTERN MEDICAL CENTER5.135.065.174.9611-1.116%

CENTRAL VERMONT MEDICAL CENTER7.046.866.976.825-1.073%

RUTLAND REGIONAL MEDICAL CENTER6.776.947.517.7124.394%

SOUTHWESTERN VT MEDICAL CENTER4.984.364.644.5112-3.232%

THE UNIVERSITY OF VERMONT MEDICAL CENTER8.778.529.219.5913.024%

Median65.645.736

Maximum98.529.2110

NMC55.065.175

Minimum33.073.304

Average Annual Growth Rate

NMC-1.116%

Median0.720%

Median6666

Range of Vermont Hospitals5566

NMC5555

Minimum3334

Hidden Base3334

FTEs per 100 Adj Disch

Act 2016Act 2016Act 2016Act 2016Act 2016

Act 2017Act 2017Act 2017Act 2017Act 2017

Proj 2017Proj 2017Proj 2017Proj 2017Proj 2017

Bud 2018Bud 2018Bud 2018Bud 2018Bud 2018

Hidden Base

Minimum

Median

NMC

Range of Vermont Hospitals

Rate Increase v1

Hospital Rate Increases2011201220132014201520162017Total Since 2011Average Annual IncreaseDateMaxMinNMCMedian

Grace Cottage Hospital5.50%10.60%6.50%6.00%5.00%5.00%5.00%52.49%6.21%-8.00%10.60%FY20116.50%1.80%1.80%5.50%1.8% (-3.7%)

Porter Medical Center6.50%10.30%5.00%6.00%5.00%5.30%5.30%52.22%6.19%FY201210.60%3.50%6.30%6.15%6.3% (0.15%)

Gifford Medical Center5.80%7.00%6.10%7.60%5.60%5.80%3.90%50.02%5.97%FY201310.30%2.90%2.90%6.05%2.9% (-3.15%)

UVM Medical Center5.70%5.90%9.40%4.40%7.80%6.00%2.45%49.67%5.93%FY20148.00%3.90%3.90%5.90%3.9% (-2%)

North Country Hospital4.40%5.10%4.60%8.00%8.30%4.80%3.50%45.61%5.51%FY20158.40%0.00%6.40%5.23%6.4% (1.175%)

Southwestern VT Medical Center6.00%5.50%6.80%7.20%4.50%3.80%3.40%43.60%5.31%FY20166.00%-8.00%-8.00%4.25%-8% (-12.25%)

Rutland Regional Medical Center5.50%9.80%10.30%4.80%8.40%3.70%-5.10%42.85%5.23%FY20175.30%-5.10%0.00%3.45%0% (-3.45%)

Northeastern VT Regional Hospital4.80%7.50%6.50%5.60%5.00%3.20%3.80%42.51%5.19%Avg Annual6.21%1.79%1.79%5.21%1.79% (-3.42%)

Central Vermont Medical Center5.20%6.00%5.00%6.90%5.90%4.70%2.45%42.18%5.16%

Mount Ascutney Hospital6.50%3.50%7.00%5.00%3.22%5.70%4.90%41.74%5.11%

Brattleboro Memorial Hospital6.00%7.40%5.20%5.80%2.70%-1.40%3.50%32.80%4.14%

Springfield Hospital3.80%5.80%6.00%4.60%5.45%2.80%0.00%32.00%4.05%

Copley Hospital5.50%6.00%3.00%6.00%0.00%-4.00%0.00%17.21%2.29%

Northwestern Medical Center1.80%6.30%2.90%3.90%6.40%-8.00%0.00%13.25%1.79%0.50%

Health Connect – Blue Cross7.70%5.90%7.30%

Health Connect – MVP15.30%3.00%8.80%

Rate Increase v1

Max

Min

NMC

-3.70%

+0.15%

-3.15%

-2.00%

+1.18%

-12.25%

-3.45%

-3.42%

Rate Increase

2011201220132014201520162017201820192020 RequestedAverage Annual IncreaseBud2019 RankGrowth Rate

Grace Cottage Hospital5.50%10.60%6.50%6.00%5.00%5.00%5.00%5.00%3.20%3.20%5.48%5165.234%

Porter Medical Center6.50%10.30%5.00%6.00%5.00%5.30%5.30%3.00%2.80%0.00%4.89%9161.175%7pm fri - 7pm sun4

Gifford Medical Center5.80%7.00%6.10%7.60%5.60%5.80%3.90%4.00%2.75%5.38%10160.316%all other times5

UVM Medical Center5.70%5.90%9.40%4.40%7.80%6.00%2.45%5.00%2.50%3.00%5.19%12161.079%

North Country Hospital4.40%5.10%4.60%8.00%8.30%4.80%3.50%5.00%3.60%4.25%5.14%4158.394%

Southwestern VT Medical Center6.00%5.50%6.80%7.20%4.50%3.80%3.40%2.90%3.00%2.80%4.58%6152.199%

Rutland Regional Medical Center5.50%9.80%10.30%4.80%8.40%3.70%-5.10%4.90%2.60%2.65%4.67%11153.741%

Northeastern VT Regional Hospital4.80%7.50%6.50%5.60%5.00%5.20%3.80%3.20%3.00%1.60%4.61%6154.420%

Central Vermont Medical Center5.20%6.00%5.00%6.90%5.90%4.70%2.45%0.70%2.30%3.00%4.20%13146.470%

Mount Ascutney Hospital6.50%3.50%7.00%5.00%3.22%5.70%4.90%4.90%2.90%3.20%4.67%8152.992%

Brattleboro Memorial Hospital6.00%7.40%5.20%5.80%2.70%-1.40%3.50%5.70%3.90%3.40%4.19%3145.844%

Springfield Hospital3.80%5.80%6.00%4.60%5.45%2.80%0.00%6.50%5.00%5.00%4.48%1147.604%

Copley Hospital5.50%6.00%3.00%6.00%0.00%-4.00%-3.70%-3.40%4.50%9.80%2.27%2113.944%

Northwestern Medical Center1.80%6.30%2.90%3.90%6.40%-8.00%0.00%3.50%2.00%5.90%2.39%14119.559%

Median5.50%6.15%6.05%5.90%5.23%4.75%3.45%4.45%2.95%3.20%4.64%153.37%

Maximum6.50%10.60%10.30%8.00%8.40%6.00%5.30%6.50%5.00%9.80%5.48%165.23%

NMC6.50%3.50%7.00%5.00%3.22%5.70%4.90%4.90%2.90%3.20%4.67%119.56%

Minimum1.80%3.50%2.90%3.90%0.00%-8.00%-5.10%-3.40%2.00%0.00%2.27%113.94%

Average Annual Growth Rate

NMC-8.37%

Median2.37%

Median5.50%6.15%6.05%5.90%5.23%4.75%3.45%4.45%2.95%3.20%4.64%

Range of Vermont Hospitals4.70%7.10%7.40%4.10%8.40%14.00%10.40%9.90%3.00%9.80%3.22%

NMC1.80%6.30%2.90%3.90%6.40%-8.00%0.00%3.50%2.00%5.90%2.39%

Minimum1.80%3.50%2.90%3.90%0.00%-8.00%-5.10%-3.40%2.00%0.00%2.27%

Hidden Base1.80%3.50%2.90%3.90%0.00%-8.00%-5.10%-3.40%2.00%0.00%2.27%

Northwestern Medical Center2.39%

Copley Hospital2.27%

HospitalAverage Annual Increase

Copley Hospital2.27%

Northwestern Medical Center2.39%

Brattleboro Memorial Hospital4.19%

Central Vermont Medical Center4.20%

Springfield Hospital4.48%

Southwestern VT Medical Center4.58%

Northeastern VT Regional Hospital4.61%

Rutland Regional Medical Center4.67%281.342

Mount Ascutney Hospital4.67%334.773

Porter Medical Center4.89%1.1899147657

North Country Hospital5.14%

UVM Medical Center5.19%

Gifford Medical Center5.38%

Grace Cottage Hospital5.48%

HospitalCurrent Price of Procedure with $1.00 Price in FY2015FY2020 Price of Procedure with $1.00 Price in FY20151.10

Copley Hospital$ 0.93$ 1.021.101.09

Northwestern Medical Center$ 0.97$ 1.03

Average of Remaining Hospitals$ 1.15$ 1.18

Rutland Regional Medical Center$ 1.06$ 1.09

Central Vermont Medical Center$ 1.11$ 1.14

Brattleboro Memorial Hospital$ 1.12$ 1.16

Southwestern VT Medical Center$ 1.14$ 1.17

Springfield Hospital$ 1.15$ 1.21

Northeastern VT Regional Hospital$ 1.16$ 1.18

UVM Medical Center$ 1.17$ 1.20

Porter Medical Center$ 1.17$ 1.17

Gifford Medical Center$ 1.17$ 1.17

North Country Hospital$ 1.18$ 1.23

Grace Cottage Hospital$ 1.19$ 1.23

Mount Ascutney Hospital$ 1.20$ 1.24

Rate Increase

Hidden Base

Minimum

Median

NMC

Range of Vermont Hospitals

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Editing this shape or saving this workbook into a different file format will permanently break the chart.

Current Price of Procedure with $1.00 Price in FY2015

FY2020 Price of Procedure with $1.00 Price in FY2015

Price Comparison - FY2015 to Present

We have reached the tipping point.You have held our feet to the fire:• Our rates have been reduced;• Our days cash on hand have been drawn down;• We have cut expenses while fighting to preserve access;• We are all in on the shift to 70% capitation by 2022, yet we are concerned

about Vermont’s ability to get there.

We are now at the tipping point where further financial pressure jeopardizes:• Access to care in our community;• Economics in our community;• Investment in prevention for future well-being of our community;• The transformation of the healthcare system.

This budget is appropriate, transparent and requires approval as submitted.

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