A sense of urgency – UVM Health Network

Stabilizing our finances requires immediate and ongoing attention if we are to protect critical services and address our challenges with health care workforce shortages and access to care.

The financial challenge is largely driven by unprecedented cost inflation and revenues that have not kept pace.

What is contributing to such high cost increases?

1. A workforce shortage, resulting in more temporary health care workers.

There are not enough qualified workers to hire, creating a workforce shortage on all levels of patient care. The workforce shortage in health care is a national issue that is not projected to improve any time soon. There are not enough qualified nurses, doctors, and other health care staff to hire, creating a workforce shortage on all levels of patient care and adding to pressure on our teams. While worsened by the pandemic, this was an issue that began before then. To fill the need, health care organizations everywhere have contracted with temporary health care staff, known as travelers.

The unprecedented cost increases we’ve experienced this year are largely due to the high demand for traveler staff across the country, which has resulted in skyrocketing hiring costs, as seen below.

The progression of traveler RN rate increase:

$75 – $85

per hour were the standard rates in 2018.

$140 – $185

per hour are the current urgent rates for traveler RN, a 46%–54% increase from 2018.

$190 – $225

per hour are the current highest rates nationally for traveler RN, a 61%–62% increase from 2018.

The lack of attainable housing across our service area and region has exacerbated this trend. Despite recent wage increases across the Network, people are having difficulty affording or even finding housing.

2. Cost of care inflation.

Increased costs due to the high rate of inflation are being experienced in multiple industries across the country, and health care is no exception. The cost to care for our patients has increased dramatically just in the last several months.

What are our costs for patient care?

What caused the revenue shortfalls?

1) Interrupted services

During the pandemic, we worked quickly to meet the needs of our community through a comprehensive response to COVID-19 and caring for patients with life-threatening conditions. While serving those in need, it meant that we reduced or stopped altogether providing services that contribute toward our operating margin. The financial impact was significant.

2) A bottleneck in patient flow

Due to the widespread labor shortages both locally and nationally, including at health care facilities outside our Network, along with capacity issues, we are unable to transfer patients as quickly to other more appropriate settings (e.g., nursing homes and mental health facilities) when they no longer need acute care. Even when no beds are available in these lower-cost settings and we must continue to provide care, certain health insurance requirements often mean we do not get paid for the non-acute care we provide.

What is the impact?

The following graphs illustrate the negative effects these circumstances have had across the Network, with the financial condition of the UVMHN Vermont hospitals illustrating the seriousness of the situation.

(Please see Glossary of terms below for reference.)

Our Health Network

Glossary of terms

Financial Sustainability Threshold

The indicator at which performance above signals short-term & long-term financial stability, allowing for prudent action on needed projects and initiatives. Operating above this line places the organization in a good position to weather occasional financial and operational challenges.

Financial Sustainability at Risk

The indicator at which, if performance is below for a sustained period of time, signals a threat to short-term and long-term financial stability. Operating below this line seriously impedes the ability for the organization to react to unforeseen financial and operational challenges. At or below this point, actions must be taken to correct the trend.

Operating Margin

A common measure of financial performance, Operating Margin is the earnings a business generates from its core operating activities. It is a dollar amount and/or a percentage of revenues that exceeds cost of patient care or if there is a loss, it represents the cost of patient care that was greater than earnings.

Operating EBIDA Margin

Operating EBIDA (Earnings before Interest, Depreciation and Amortization) Margin is considered the key indicator of an organization’s true financial condition, measuring operating margin performance as a percentage of its revenue. Knowing the EBIDA Margin allows for a comparison of one organizations’ real performance to its peers.

Average Age of Plant

This measurement helps determine if an organization has appropriate levels of capital investment to ensure capacity to meet current standards of care for technology, equipment and facilities for the communities and patients they serve. There are common benchmarks that inform an appropriate level by industry.

Days Cash on Hand

This represents the number of days a business can continue to pay its operating expenses with the current cash reserves available. There are common benchmarks that inform an appropriate level by industry.

Our budget for fiscal year 2023 projects cost inflation of $184.8 million.

The financial challenge is largely driven by unprecedented cost inflation and revenues that have not kept pace.