‘Nonprofit’ healthcare system governing boards questions

As healthcare costs in Vermont gobble up more and more expendable resources needed for housing, education, property tax abatement, etc. it’s time to ask hard questions and hold providers and their governing boards ethically and legally accountable for honest answers and transparency instead of further mission-failure and public relations psychobabble.

Key to understanding the current healthcare crisis today is its history. Established in 2011, University of Vermont Health Network, formerly called Fletcher-Allen Partners, by 2018 had acquired three New York hospitals and two more Vermont hospitals, Central Vermont Medical Center in Berlin and Porter Hospital in Middlebury, and also the former Chittenden and Franklin County Visiting Nurse Association.

It’s important to understand that University of Vermont Health Network is not a hospital but rather a lucrative healthcare business aggregator acquiring and running hospitals and healthcare service institutions to expand market share. The stated goal was, through collaboration and cost-efficiencies across the network, to lower costs, improve access and enhance service quality. But what has emerged from all this is a bloated monopoly that has skyrocketed healthcare costs and reduced access for Vermonters and Vermont businesses, while failing to achieve “cost efficiencies.”

Latest available 2019 data from PubMed, a division of the National Institutes of Health, shows $584 million worth of annual waste embedded in University of Vermont Medical Center on the administrative and management side and a total of $1.038 billion in waste across all Vermont hospitals. So much for systemic cost-efficiencies.

Vermont healthcare employees fall into two groups: hands-on healthcare providers (clinical) and system managers and administrators (overhead). When the $1.9 billion budget of University of Vermont Medical Center is broken into these two categories, it ranks among the worst ratios of any of the similar-sized academic medical centers in the country. A 2023 analysis of federal data by Rees Partners, LLC, showed the University of Vermont Medical Center’s ratio of clinical care to admin/management to be 1.38 against a 2.30 mean among 44 comparable academic medical centers, or 40 percent worse than the mean.

While Blue Cross Blue Shield of Vermont teeters on the brink of insolvency with less than two weeks of cash reserves to pay claims, the University of Vermont Medical Center charges to all commercial insurers rose by $400 million in FY 2024 — 74 percent of which were Blue Cross Blue Shield of Vermont claims. In the recent court settlement of a suit brought by the University of Vermont Medical Center against our state regulator, the Green Mountain Care Board, the plaintiff agreed to offer $12 million back to the Blue Cross Blue Shield of Vermont, adding insult to injury. On May 15, Blue Cross Blue Shield of Vermont filed a rate increase request with the Green Mountain Care Board of 23.3 percent in the individual market and 13.7 percent in the small group market, increases needed to survive the ongoing overbilling.

Meanwhile, the University of Vermont Medical Center lost $119.5M on Medicare reimbursements in FY2022 while 82 of 106 comparable academic medical center peers broke even or earned positive margins from Medicare. The average annual net profit in this group was $5M. Over the past 10 years, the University of Vermont Medical Center has lost an average of $54.5M a year caring for Medicare patients.

The latest analysis by Rees Partners of 2018 & 2019 audits by Price Waterhouse Coopers and in 2020 to 2024 by Ernst & Young found “board-designated” and “board-restricted” funds in 2018 of $897,484, escalating 220 percent to $1,942,529 in 2024. The University of Vermont Health Network Board owes us an explanation of what the “terms and conditions” are for actually using these funds to provide healthcare to Vermonters rather than squirreling money away from accounting scrutiny.

We must be clear that the declining number of healthcare professionals in the system work tirelessly to care for and help heal and control pain among those suffering adverse health events. MDs and nurses (RNs & LPNs), physician assistants (PAs), techs, mental-health counselors, addiction specialists, primary-care docs, hospitalists and specialists for the most part work in the system because they believe in the goal of universal healthcare for all, even as our country doesn’t. These “better angels” of the system deserve better. Non-specialists are generally under-compensated for their professions. Many techs, nurses and PAs can’t afford to live in the communities they serve and leave either by choice or necessity. The term we often hear is “moral injury,” meaning that the lofty goal of caring for those needing help is confounded by the system in which one works.

By regulation, all Vermont hospitals must be nonprofit. Nonprofit board governance is legally and ethically accountable for its institution’s delivery-on-mission, as well as its ethical and financial integrity. The president serves solely at the will of the board, which must hold him or her accountable in an annual performance review. The board is also accountable for compensation and benefits. Is more than $2 million, including bonus and benefits, the appropriate compensation for the president of an institution whose climbing costs and declining access are a matter of record and whose quality was just downgraded by Medicare because of an increase in hospital-acquired infections, though these are not reflective of the quality of care but rather of poor facility hygiene?

Given the dire financial numbers cited above, it’s a stretch to assume that the governing boards of our healthcare institutions are doing their jobs according to the rule of law.

Isn’t it time to hold the intermingled governing boards of our University of Vermont Health Network hospitals to ethical and legal account for their own governance failures? Here are their names: the University of Vermont Health Network Board and the University of Vermont Medical Center Board.

Many Vermonters concerned about the runaway costs of healthcare in Vermont and how those costs have put healthcare insurers at grave risk or simply caused them to leave the Vermont market have come together to form a coalition to suggest ways to make our healthcare infrastructure affordable, accessible and sustainable while retaining service quality. Made up of business and nonprofit leaders, a former governor and president of the Vermont Business Roundtable, four statewide service unions, AARP-VT and Vermont Businesses for Social Responsibility, Vermont Health Care 911 was formed and is working across party lines to achieve these shared goals.

In deference to the “common good,” nonprofits are not required to pay taxes and donors to their causes can deduct their contributions. Were the combined retained earnings of the University of Vermont Medical Center and University of Vermont Health Network taxed, what would that contribute to Vermont’s stressed budget? Were the vast Burlington property holdings of these institutions taxable as properties in Chittenden County, how much would that revenue contribute towards the creation of affordable housing for those who work there?

Having chaired 13 statewide Vermont organizations in my long lifetime, including Fletcher-Allen Health Care two decades ago, shortly after the president of the hospital was charged with lying to its regulator, the department of Banking, Insurance, Securities & Health Care Administration (now the Department of Financial Regulation), and who was then remanded to two years in a federal prison, I wonder if it’s time for a thorough audit of our leading medical institution by the Vermont Attorney General’s Office or the Vermont State Auditor. Remember: The difference between a nonprofit organization and a business, simply put, is delivery on mission rather than lucrative business expansion.

We must ask these questions, but more importantly, the boards of these institutions must ask these questions, and we must hold them accountable.

(Bill Schubart is former chair of the Vermont Business Roundtable and Fletcher-Allen Health Care, current board member Vermont Health Care 911 and an adviser to The Charlotte News.)