 take the meeting out of recess and call to order, again, the Green Mountain Care Board's morning meeting of March 22nd, 2023, relating to the UVM enforcement action. Russ, could you pull up the draft motion if it's ready? And one thing to say while we're pulling that up is just so the other board members are aware, we have a hard stop at 315 today. So we're gonna have to see how quickly we can get through things. And if we need more time, we're gonna have to take it, but there's gonna be a hard stop at 315 today. So Mr. McCracken and Ms. Lindberg worked on the motion when we took a recess and they added in some adjustments recommended by board members. And what I'm going to do is I will read through them piece by piece. And if board members have comments to any component of it, please make the comment and we'll see how board members sugar off on various components and adjust the language if need be. And then we will take up a motion if there is one on the entirety of the language. So the first part, I don't know if anyone's seen this yet, but go ahead and read the first section. Okay, so the biggest changes here just to summarize it looks like the addition of 0.3 directing that the funds be held prospectively in the UVM health network funded depreciation account with funds being utilized within six months in the short-term investment portfolio and funds that are going to be used in more than nine months to be held in the 6040 portfolio, which as I understand it has 60% of its holdings in equities and 40% in fixed income. So UVM has three different categories, short-term 6040 and 7525. Is there any board comment or suggestions relating to this first paragraph? Oh, and you had said six months, but I think you meant nine months. I just wanna make sure that I understand correctly. Yes, nine, I'm sorry. No, no, that's okay. Thanks for correcting it. No worries. So I have a comment on two that's related to the fourth bullet. So I'm gonna just hold that until we get to the fourth bullet. It's just so you know, but I'm fine with the addition of three. I'm also fine with the addition of three and the second bullet can be removed. It was the assessment of the need that I was after. The second bullet, number two. Second, third bullet, second sub-bullet, an analysis showing the use of funds will increase capacity. That's, you can't plan the results of the analysis. It's the assessment of the need for inpatient capacity. That's the key thing. That was key for you, but Jess had an alternative proposal and I'm not clear on where her alternative proposal is. All right, let's, hang on, sorry, just to make sure. So, all right, Robin, you're okay with the first paragraph. I'm okay with the first paragraph. Tom, you're okay with the first paragraph. Jess and Dave. I'm okay with the first paragraph. I'm okay. Okay, all right, let's move on to, let's move on to bullets one and two and then we'll move to the third bullet. So, board reading, for the board to determine progress is being made, the proposal must be submitted to the GMCB by May 31st, 2023. The board will need confirmation from DMH that it has satisfied the proposal adequately reflects its contributions. Any comments or suggestions on those two bullets? I'm good. I'm okay with those as well. So, Owen, Tom, Robin are okay. Jess, Dave. Yep, yes. Great. All right, we'll move to the third bullet and which has four sub bullets. I need a moment to just read this again. So, give me one second. Okay, why don't we take them piece by piece because they're a little bit meaty. If they enter or late, we need to adjust. We can't. So, why don't we start on the first bullet? Go ahead, everyone, just speak up if you have any thoughts. I think just from a logic standpoint, an analysis showing how the use of funds could reduce the frequency and length of stay. So, we're not predetermining the result of the analysis. That makes sense to me. I have no other comments on bullet one. I guess my question is what I heard Jess, and I don't want to speak for you, Jess, but what I heard you say is that you wanted to know that the proposal would reduce the frequency and length of stay for adults. So, you were presupposing the outcome that you wanted to see in the proposal by saying the proposal is only acceptable if it does this. But maybe I'm wrong about that. No, that's what I was suggesting. The spirit of the initial enforcement was this decision was the hope that this increased inpatient capacity was going to do just that, which was reduce the length of stay and the frequency of borders in the EDE. I fully recognize that that is not the only way and that there may be more flexible uses of those funds, but the spirit I think should still be that the use of these funds reduces the crisis that we're seeing in EDEs. So that was the original intent of my amendment. How would you like this worded member Holmes? Because I think you're right. Yeah, I agree with the spirit, right? Me too. I'm actually okay with this bullet the way it's written showing how the use of funds will reduce the frequency and length of stay is fine by me. Any other comments on this first sub bullet? I'm fine with the wording. What will or could are both fine by me? Sub bullet two. So from my perspective, it could be removed. If we were to keep it, it would require a similar change and analysis showing how the use of funds, these funds could increase. I think that consistency is good. I have no other comments on two. Any others? Okay, moving to three. An assessment of the need for inpatient capacity and inpatient care for patients with mental health concerns. Is there overlap here with Act 167? Is this part of Act 167 to do the needs assessment for inpatient capacity for mental health concerns? I would also point out that UVM did complete their estimates and we actually just benefited from some potential analysis that was done related to another potential project. So I just wonder if they would say we've already done this in respect to this order. Because their needs assessment, if I remember going back and looking at the proposal was included in the CVMC hospital proposal that was not, that is on permanent hold, right? I think I remember reading that in there. Tom, are you okay with the idea that that needs assessment was done already? I think it's important that we, if that's the case, then I'm forgetting it, which happens, but I don't remember that information and it would be helpful for this deliberation and it would be helpful to have that information as part of what we review on May 31st. So if we have it, we don't need to ask for it again, but we need to collate it to think this through. Yeah, we do have it, Tom. The UVM health network made at least one, but I think two presentations on their analysis of what the inpatient needs were. So I think we can, I'm sure our hospital team can pull that back up, but we do have the presentation of what they're under various assumptions, what the bed need was. I also believe they pointed to that as one of the deliverables that was reusable from the funds expended already. Sounds like we don't have to ask for it again. I'm okay with that and I think we can remove it. Everyone else is okay with that, right? Okay. The fourth now, the third bullet, a set of metrics to monitor the number of mental health patients board and EDs developed in consultation with DMH and directors of state emergency departments, which shall include the number of patients boarding for more than 24 hours, 36 hours, 48 hours, and five days, gender, race, and ethnicity, distribution age, distribution and average with results reported weekly. Again, just a brief update. I did confirm that the Department of Mental Health in collaboration with VAAS is underway on a project kind of using some syndromic surveillance methodology to extend to mental health in wait times. So I think that project has a lot of promise and I would volunteer that staff could kind of take this as a directive and help produce that as part of that effort and that would be, I think, more systemic than this specific ask, but also happy to hear what metrics they recommend. So do you have a timeline of when that project is expected to be operative? I know it's underactive development and I'm waiting for some more, hey, it looks like someone else might know with their hand up though. Okay, we can get Mr. Del Treco, do you have information on that? Yes, sure. Couple of things on this point. Specifically, we do collect this information. It's a little bit different than what you've described from a time period, but what we do collect is mental health, ED wait time or borders and EDs for less than 24 hours, one through six days and seven plus days, so that's existing and it's posted on the governor's dashboard. So that's already in play and has been in existence. So that's probably a good place to look for this. We are highly concerned over the specificity around gender, race, ethnicity, and age distribution. We've had on more than one occurrence or at least one occurrence where individual patients have, it's been attempted to identify these patients. So HIPAA is of great concern and it's something that you would really need to be discussed as this data would be examined and I'm happy to meet with your staff and your team to share and make sure you understand what's being collected and how it's collected. The second thing I would just say, I'm not sure in this motion and in this bullet how UVM Health Network would be responsible for all the state emergency departments to do this work, but it's already largely complete. Thank you. Next. Okay, board member, comments or suggestions relating to this bullet. Yeah, I'd make a comment. It's, I'm glad to hear there's an existing dashboard. It would be helpful to have that included in the proposal that comes back so that we know where to look to see if this intervention is having the desired effect. In regards to revealing personal data, I understand we're a small homogeneous state, which makes it easy to identify particularly minorities, but there's not another way to assess the equity of the care that we're delivering. And so the data may not be publicly available, but stratifying so that we can understand who's being affected, who's being helped, and trying to figure out who's being left out, I think is a wise thing to do. And of course, we need to be careful about privacy. So I'll comment that I haven't reviewed the information that the Mr. Del Treco referenced myself, I will after this, but I would say that if this is duplicative difficult for UVM to acquire and raising PHI concerns, those give me some concerns. I don't know how we receive it and maintain it and make it public in light of that. So I would recommend that we do not include at least gender, race, and ethnicity in anything that's posted publicly. And I'm not sure that we need this if it is in fact duplicative. I'm concerned about collecting statewide data through a one hospital enforcement action that doesn't seem appropriate to me. So while I'm interested in the information, I would prefer to take it into a different venue. So I'm in favor of deleting it from this particular action. I was gonna comment, but I see Russ has his hand raised. So I don't know if there's- I should wait. It's possible we're making the same comment. I did wanna know that in addition to what Mr. Del Treco mentioned, the hospital budget guidance as currently contemplated does have a question around ED boarding and that question could be developed further. And there's a benefit to that in that it covers all 14 community hospitals and collects the data from them directly. So just a thought. Thank you. That's a good one. Thank you. Yeah, actually that was more or less gonna be my thought. I agree with some of the comments that Robin made, some of the comments that Owen made. And I, Tom, I very much appreciate the desire for this information so that we can see if, for example, this proposal is making a difference. And I very much appreciate the equity, adding the equity lens to this to understand if there's any disproportionate impact. So my thought is we delete this from this particular enforcement action, but we don't lose the idea and that we spend a little bit of time to see what is currently, understand really what is currently being collected from DMH, what is proposed to be collected from DMH, what we can do in our hospital budget guidance to better understand the equity concerns around borders. And also, I'm not sure, I don't know what the feasibility of this particular, do we have all of the data that we need to do this? I feel like we just need to do a little bit of homework to understand what's feasible, how do we best get it, who's responsible for getting it, what's already being received and collected, and then look for voids and see if we can, if we have a role in filling those voids through hospital budget guidance or something like that. But I just want to say I really appreciate the need for more data to understand how we impact this problem. I'm just not sure it's through having UVM Health Network collect the data through this enforcement. I appreciate everybody thinking with me about it. However we choose to address it here or remove it here and bring it up later. The spirit of this came from the 11 emergency department directors wanting boarding measures. So they were not aware of whatever is already being collected. And so we should make sure that we're including their needs, their views, and making sure that they're aware of what is available. Okay, I think that's a good point. And I think this is an important conversation. And for public commenters, I don't want to, I want to stay focused. We have, this is not public comment time. So I saw, I think Ms. Green, you work at VA as I believe. So, you know, if you have a comment or something to inform us, please go ahead. But I want to kind of stay focused because of our time issues. That's okay, thank you. We do collect the data from the ED directors. They are the ones who give us the data. Oh, great. Thank you for clarifying that. Okay, so I would favor removing bullet three. Do other board members, can you give me a sense of where you guys are at that? I'm in agreement. Agreement, me too. Okay, thank you for raising the issue. And we can look into this as we continue with our other work. Okay, I move to adopt the motion language that is before us after having discussed it. I'll second. Ms. McCracken, would you mind taking the vote on this one? I'm sure I'll take a roll call, but board member Holmes. Yes. Board member Lunge. Yes. Board member Merman. Yes. Board member Walsh. Yes. And chair Foster. Yes. Okay, the motion carries. And thank you, Ms. Lindberg and Mr. McCracken very, very much. You guys did a great job helping the board deal with this and all the issues that were connected with it and to all the public commenters for the thoughtful suggestions that helped us make what I think is a good decision. So, Ms. Barrett, do we need to switch for the one PM afternoon board hearing or can we stay? We're fine. We're all on the one PM teams link, so we're good. Thank you. And sorry, I haven't done this before, but do we need to move to end this? No, we can continue. Okay, great. Okay, we will move on to our one PM board hearing and it will be Ms. Lindberg and Mr. McCracken. You guys are lucky. We get the whole day. So we'll turn to you for the hospital budget guidance. Thank you. Thank you. I seem to always struggle in remembering how to present. All right. Are you able to see that with my team's crash? No, we can see it. Okay, great, great. Hey, good day then. So here to continue talking about our proposed guidance for fiscal year 24. So what we'll do, we'll start by just doing some review of some modeling I did on how the expense factors when I played out in previous years and then talked about some of the options for fiscal year 24. So as a reminder, the Green Mountain Care Boards and the process of updating and improving its regulatory oversight. Last, and we are looking at fiscal year 24 as a bridge between what we've done for 49 years and what we're trying to move towards in the future. And so how that bridge looks is a great question. So last time we met, we recommend, or last week when we met about this, staff recommended using nationally benchmarked expense growth from fiscal year 22 to 24. And so let's see how that might've looked. So what I did is kind of truncated the data of what would have been available at that time and applied those trends. And some limitations like anything is that there are some limitations in the data available to us. So things have changed over time and how it's reported to us most notably in fiscal year 2020. We also aren't accounting for adjustments which is an important piece and should be accounted for as this work is moved forward. Things like provider transfers and accounting changes can be material to some of these. Also we should keep in mind that we're kind of building in some bias into this model because an actual budget probably is related to what was approved. And so that's always gonna kind of be a biased input into it. And so that's just something to keep in mind. So probably not a surprise to any hospital CFO but once you account for labor pharmaceuticals and supplies that accounted for 80% or more of total operating expenses. From fiscal year 12 to 19 it was actually over 85% of operating expenses. You can see the mess that starts in 2020 that goes back to the reporting changes. And this is when some hospitals but not all reported traveling nurses as a discrete expense category. If we add those back in we get pretty close to 80% with a few 79s and then the one exception being Springfield and fiscal year 2020 at 76% haven't had a chance to dig deeply into that. But if I were a bedding man, which I'm not I'm assuming that has something to do with the bankruptcy that was affecting them during that fiscal year. So things didn't look typical in that fiscal year. And so I just showed a couple looks there's infinite ways you could but looking at that average of the two year changes and then if we took a 25th percentile of those changes so kind of a more ambitious growth target and then seeing how that compared to both the actual results in the fiscal year as well as what the approved budgets would have allowed. And so here we have on the bottom the fiscal year budget, fiscal year 17 through fiscal year 23 and the first bar which is blue is what the actual labor expense came in at for the system. The second bar is what the Green Mountain Care Board budget decision approved. The third is what I'm calling the pilot or what this might have sugared out to if you use the average of employment cost index growth and then the final red bar is what it would have looked like using the 25th percentile. And so in these earlier years it looks like the labor average was a bit closer to the actual results than the approved budgets. Nothing really touched it from 21 on hard to model for that kind of dramatic change but it does seem that the approved budgets got closest in those times. So another plug that emerging trends are more knowable to the regulated entities than kind of looking backward and why that's an important part of this process and thinking through how we digest that kind of evidence when it's submitted is an important piece of this process. And just because I'm that kind of person just always look to see how it looks for our critical access hospitals versus the PPS. Here we see less variation in those years prior to 2020 about how it would have sugared out. But we again we see that it's very hard to project the labor growth that we did actually experience in fiscal years 21 and 22. And for PPS we see that the pilot labor average actually performed the best even up until 2020 and 2021. It was equal to the approved budgets. And then once again approved did the best for what we saw in fiscal year 22. So wow, I didn't expect it to work out that well. So I was encouraged that we might be on to something here when I saw that. And so this is just try and take a deep breath. We'll get through this one. But then so basically what this is saying is how the three different models so the GMCB is the approved rate, national average, national 25th percentile. Things encoded in red means the actual expenditures exceeded budget. So the budget was less than the actual and then, and by budget I mean the outcome of the model. And under 100% mean actuals were less than the model. So the model overestimated it. And you can see for instance in dark blue here Gifford 81%, I happen to know that's an accounting change. So that's not a real miss that is not accounting for those kind of changes that are really important. But you can see again everything is largely not accounting for the labor growth we saw in 21 and 22. Most people expect 22 to 23 to still be a pretty significant growth, but expecting to see returns regression to more like historical means after that, but hard-telling not knowing like most things in life. But with any process there's gonna be years or places where this might do better or worse relatively speaking. And so I didn't see anything like systematically different here, but obviously if this is your hospital these are the types of numbers that are really important to you seeing how those things sugar out. Keep saying that. So supplies and pharmaceuticals. So pharmaceuticals were not a dedicated buying item until fiscal year 2020. I believe there was one hospital who reported them in fiscal year 2019 and even to date not all hospitals are doing so. So it's a little bit hard to interpret these independently from one another. So just keep that in mind as we look at how these do discreetly. So you can see that actual supplies until that discrete breakout are way more. But we also interestingly see that the approved supplies are not keeping up with what was actually spent. So I think that that is just something to note probably part of the reason why pharmaceuticals started being reported separately. But after they come out and so we don't really have a true measure until fiscal year 22 because of the two-year lag and we see that again the models didn't kind of foresee some of these growths but that both the PPI did seem to get closer to actuals in fiscal year 22 than the approved budgets. So that was kind of neat to see. And we see for critical access hospitals again we see that the actual supplies were much greater than well were greater than the approved supplies. It's interesting to me that the model actually seemed to perform pretty well in those early years and starts to kind of over gets back on track again in 22 after that thing. So again perform better than I would have guessed not too shabby. And for PPS again that pharmaceutical in the early years is really distorting the ability to assess this in the first few years and then once it catches up it looks like nothing really prepared. It was capturing the actual supply growth but once again we see that these national indices seemed to be getting closer to what was actually spent than what was approved in the budgets. So now we're moving on to pharmaceutical alone. So again we've got a two-year lag so you can see that dramatic growth in the cost of pharmaceutical or the pharmaceutical expense in the budgets and we can see that the approved rate was insufficient and that neither model seemed to perform very well for that particular expense. So definitely more work to do in that department. And so for critical access hospitals again I think we don't really have a very fair shake on how this did for either but work to be done and fascinating to see how it played out to me and here again is kind of the individual performance for specific hospitals and kind of again actuals were over the budget if it's red actuals were under the budget or the model performance if they're in blue and so we see a lot of volatility in these measures but this is combining labor and supplies and it does a bit better when you do that but again I think a lot more work to do to get that right. So where does that leave us? Well feedback from different quadrants. We got a letter from the hospital association and in my one-on-one conversations with board members feeling like this is an exciting direction but I don't know that we're ready to take that full step. We I think we need some more time to develop and understand these things and so that given that again we've been doing this at least since the board started back in 2011 a certain way that it might be wise to stick with just the NPR benchmark for fiscal year 24 and start kind of piloting some of these analyses and the upshot of that is that we actually already have that benchmark for fiscal year 24 because the fiscal year 23 guidance established a two-year benchmark and that benchmark was growth not to exceed 8.6% from fiscal year 22 to fiscal year 24 that 8.6 comes from the upper end of the all-pair model total cost of care per capita growth. So it's 3.5 to 4.3 for each year. I think if you compound it it should be a little bit different than 8.6 but 8.6 is what was in the guidance. So that's what we've got to look at. However, for those of you that were here or got to watch the video tape the fiscal year 22 budgets not really for anyone's fault were just very difficult to draft and a lot missed more than you would, it has historically been true. Utilization was a large part higher than a lot of hospitals expected. However, in all but one case the growth in expenses were greater than the growth in net revenue. So that's why so many hospitals finished the year in red we'll be looking at the fiscal year 22 actuals next week for more detail on that performance. As a result during the fiscal year 23 budget decisions we voted and decided that in place of budgets we would use the projections for fiscal year 23 to look at growth and to be consistent with that we think that you would want to use actuals in that 8.6 growth. And so how does that look? So here, three columns where is the fiscal year 22 actual? There's a few hospitals with astrocies here that indicates adjustments for provider transfers slash acquisition as well as accounting changes that were documented in appendix two. UVM health network hospitals filled those out a little bit differently and I wasn't entirely clear if they needed any adjustment. So that's kind of a to do before next week. But this would be kind of the fiscal year 24 NPR limit. And then just for reference you can see what the fiscal year 23 approved budgets are and the final column is essentially the headroom or lack thereof that a hospital would have. So if you compare where their 24 limit would be to 23 currently it ranges from a decrease of approved budgets of 5.8% up to a headroom of 12.1% and system-wide there's no room for growth. 0.1% is nothing. And so I think because we know this is ambitious I would recommend that if someone is able to propose a budget that fulfills this that while we would certainly review it for reasonableness that I would not necessarily I would not recommend adjusting that budget and for hospitals that are not able to accommodate it that we still entertain their evidence and rationale for why they're unable to meet that. And then so some more factors that we didn't get a chance to talk about last week. So assessing commercial price changes. So important point is that unlike the other factors we've discussed this isn't directly based on expense, right? This is a revenue measure. It is usually a material assumption associated with a proposed budget. So I think that one essential question for the board is what's important in its review of these commercial rate assumptions. And I do have two potential options for how to think about those. One is to kind of look at the looks like I missed some nouns there, but review relative and by relative I mean commercial price change to the deflated commercial gross patient revenue increase. I'll explain what that means, don't worry. And then also kind of just looking at how it compares to historical budgets. So what do I mean by deflating GPR? So what I mean is, and this is a real back of the envelope but I'm trying to give you something to work with but if we took out the full approved change in charge over time just took it out so that what we're seeing is just change in utilization theoretically, right? For gross patient revenue. Now remember, gross patient revenue is not gonna get into any of that reimbursement variation. This is just what happened in the care that was delivered and it can be thought of as a proxy of utilization and remembering that utilization is more complicated than volume. So your gross revenue will change depending on the services you're providing and the intensity of those services. So if folks are staying longer if they're getting more MRIs instead of X-rays that's the sort of stuff that's gonna move your GPR after you adjust for price. And so when you look at that and starting with deflating price increases in fiscal year 14 based on approvals in fiscal year 13 we see that GDP for the system grew 20%. That story is a much commercial GDP based on the payer revenue input table. Another risky thing about this is that that table's been described to me as squirrely by more than one CFO. So it's not necessarily the way that they're thinking about their business or the way that they're necessarily booking revenue. So we just wanna keep in mind that this isn't necessarily bedrock information. It's provided in good faith but it's a little bit tougher sometimes to produce. But at any rate for all its warts that growth was 20% for the system but at the hospital level it ranged from negative 28% to 31% with a median of 16. And that's also gonna be sensitive to your payer mix. So if you're getting fewer or more commercial in your patient population over time that's gonna be reflected here. And to do this more appropriately we'd wanna adjust for that as well. So then compare that proxy for utilization again highly imperfect but the best I could think of in the time available. If we look at the change in the net patient commercial revenue after adjusting for bad debt for that same period the growth was 33%. So this is gonna include both that utilization change but also price. And so that grew 33% versus the 20 in that time period and it ranged from negative 17 to 98% with a median of 31%. The average kind of cagger the compounded annual growth rate system wide just on that commercial revenue side is 3.7%. So if we were to assume that the growth on top of the utilization then would be 13% the kind of price impact over that time period would be 1.4% with individual results to vary. I just wanted to present at a high level before I kind of dug into anything hospital level because again, like I have some concerns about the assumptions we're making it's not like, but you know, it's like I said it's an option. Another option in thinking through these commercial charge increases or kind of the effective commercial price is looking at historical budget decisions. We haven't historically made a lot of decisions specifically related to commercial price. The board historically looked at change in charge as a reminder, charge is the charge master value or the amount that everyone looks on if you look on your explanation of benefits and you're insured, that's often a number where your insurer has negotiated a discount. That's also the starting place if you are paying out of pocket or is the kind of value that is used when thinking through like a free care or bad debt analysis at a hospital. So looking at the change in charge, the two-year average change in charge from fiscal year 13 to 23 GMC approved 4.00 with a range of negative 3.7 to 11.55 at the hospital level and from fiscal year 19 to 23. So kind of the immediate past it was 4.18 ranging from negative 1.33 to 11.55. UVM Health Network has provided an additional indicator here since 2017 for its hospitals and that is that effective commercial rate. So that's their way of saying this is what we think will happen to commercial price. So doing that same look from fiscal year 17 to approvals in fiscal year 23, the average was 5.3 with a range of 0.72 to 14.77 and the more immediate value, the average was 6.77 with a range of 2.3 to 14.77. So is there like a clean benchmark here? I'm not sure, but I'm just trying to give you some ways to try to interpret and again, signal to regulated entities how you're gonna think about price when these budgets come in in July. We have a few outstanding or there's certainly one outstanding decision point that we can talk more about next time or if there's time allows today, but as price known pricing changes evolve for governmental payers, what's the plan when the budgets come in? Will you be adjusting everybody's budget? Will you only adjust those that are under the, that are over the 8.6 over to your benchmark? Are you only gonna account for those that are known prior to the budgets being submitted? And is there gonna be any difference in how proposed versus final rules would be treated? So that's just again, process questions in terms of how these budgets come before you so that we can explain how they'll be treated and do that in a consistent manner. So coming very soon, I will have the full draft of the guidance view by the end of the week and it will include the options that we'll be walking through next time on financial benchmarks. We will also be looking at a deeper dime on the ratio between free care and bad debt and give you some information on that. I'm pulling some data from cost reports. They recently added some more detailed information about these, but it's pretty messy. I don't think everyone's necessarily complying with it as it's required yet. So I'm still cross-walking it with GMCB data to figure out how we can best incorporate that kind of national perspective in that look. So that was the main material I had to go over today. Just happy to entertain questions, comments, concerns. How are we like and thanks for your patience. All right, thank you very much, Sarah. I'll open up to board comment and question. We can take them the same order we did this morning, which I think was Dave, Tom, Jess, Robin and then myself. Hey, well, thanks so much, Sarah. Gents stuff might need an opportunity to spend some time with you to unpack this a little bit more. I do think one of the things that strikes me about seeing this data and is that I feel like myself and probably the board would benefit from a deeper dive into understanding labor costs and pharmaceutical costs so that we can better understand how those are affecting healthcare in Vermont and budgets that we work with. So I, and I kind of wonder if this is gonna become, these are such two hot button areas over time that having an annual sort of refresh on what's going on may be needed for a few years while they're still volatile. I also agree with the idea of getting metrics and starting to see how this is gonna play out while using our more traditional budget process for the year. So anyways, that's all for now. Thank you. Let me go. Oh, and it was I next, I think I might've been. Sure, go ahead. Okay. Well, so again, I don't think we can thank you enough, Sarah, I know from the email times that we get emails, how late you and your team are working and trying to do these types of analyses. We asked for this analysis last week to see how these benchmarks that you were proposing would actually work. And I just appreciate all the time that you had to take to give us this analysis. So a couple of thoughts. And again, some of this, I actually wanna walk at some point, not, I think I'm gonna need some time to digest that your commercial, what did you call it? GDP table? Yes. So I need some time to digest that. But I think what I like the approach of, we did set a two year NPR benchmark last year. I think hospitals want predictability. So they knew last year what we were gonna do for the next two years. I think we can stick to that this year for consistency and predictability while we're moving to potentially a new process next year that moves away from NPR and move towards expenses. While in that bridge year, we start to look at how these benchmarks are performing based on the hospital submissions. But where the, sorry, where the other factors, I guess I should call it, the labor expenses, pharmaceutical expenses, one of the things how they compare to the indices that you've laid out. I think that's helpful. We'll learn a lot this year. But if we're thinking about a benchmark that the board is setting, I think it does make sense to stick to the two year benchmark that we set last year. And move towards looking more focused at expenses as we go forward. I think I do agree with your assessment that using fiscal year 22 actuals does make sense. So as the base from which to look at that 8.6. So again, this is my reaction today. I think I wanna hear what other board members are thinking, but I like that approach to some of your questions around commercial rate. Again, I wanna look at that GDP table a little bit more closely. I wanna also make sure that this year we're getting a standardized reporting of commercial rate that some hospitals are not sending in change in charge and other hospitals are sending in something effective commercial rate. However, we outline it and define it, having one metric that all hospital uses so that we can understand what is the impact on commercial rate payers next year? That's what I wanna understand. If change in charge is not really truly measuring the effective pocketbook hit, then we need a different measure, right? But you don't understand what I'm saying Sarah. Apples to apples across all hospitals that really measures the impact to commercial payers and patients. So that's important to me. Trying to give my other notes. I do think one of the, your question I think on your table was what factors are we gonna consider as we evaluate commercial rate submissions? I think that some of the data that you had put out there before around some of the burns data, some of the relative price and cost data, I think that is important to be reviewing in the context of the submissions. So I would say that. Trying to think whether my notes are here. Oh, in terms of the Medicare sort of adjustments to payments and proposed and final rules, one thing that would be helpful to see if you could do a look back, how close are the proposed rules to the final rules? If they're very highly correlated, then I would be comfortable using the proposed rules in an assessment of any budget adjustments. So I guess that's a data point that I don't have, but if they're highly correlated, then I guess I would be comfortable with applying the proposed rules. I think those are my notes for now. I'm sure other comments from other board members might spark some questions or some thoughts. But again, a huge thank you. Member Walsh. Thank you, Sarah. It's a lot to digest. The model seems to have performed very well. So that's a great sign and it was a good exercise to go through. One thing that came to mind listening today with labor and pharmaceuticals, those are really big buckets. And I wonder how we can stratify them. For example, labor is pretty simple, right? In healthcare, you can look at the labor devoted toward patient care or nonpatient care. Pharmaceuticals, it's not as straightforward, but some things, if we're looking at average performance, some things are just so expensive, right? So I wonder about how we might stratify there a little bit to get some better insight into what the big drivers are. But otherwise, I really enjoy hearing from you and look forward to talking with you more about this in coming weeks. Member Lynch. Thank you. So I wanted to just make sure I understood a couple of things. So when you were talking, on slide 23, when you were talking where you did the system wide analysis of trying to isolate the price growth over time, I gathered, but I'm not sure you explicitly said you would then do that analysis for each hospital. Is that the proposal? So when we're looking at a specific hospital, we would get a similar chart based on their specific information. Yeah. Yeah, I just wanna make sure that in addition to the kind of price deflation we account for the both gross and that pair mix. Okay. Thank you. I just wanted to check on that. So I think if I can totally understand the growing pains of trying to shift to new benchmarks, so I'm fine going with the flow here. I do think if we are gonna use an NPR benchmark that we should be collecting the information about all expected revenue changes from the public payers so that we understand how the assumptions in the budget compare to reality. And I'd have to, I'll do this before next week, but I was gonna go back or if you happen to remember what we did last year, because I know that, so last year you had a framework for where you assessed all the budgets for reasonableness. And I guess my question is, are you basically proposing something similar to that this year? Yeah, that's it. But just making sure everyone knows that's what we're doing in advance versus that's what we just applied in stride last year. Got it. And so then last year when we were after, so after we did the first cut of who met the guidance and was reasonable, we did use some of the economists inflation recommendations. And so I was just curious how you were thinking about that compared to like the benchmarks that we went over last week. So they're largely one in the same. It's just that they're a little bit more refined and thought out on those a little more toward the margins. This is more granular than we applied it last year. Yeah, that's the main difference for the inflation. Okay, got it. So I think if in the guidance we can spell that out a little bit, that would be helpful at least in reacting to it because I'm sort of intuiting some of this from how what the approach was last year. But I think that to your point that you just made, I think that should be clear in terms of that sort of process. And I liked the process last year. I thought it was thoughtful and definitely it's better to say that upfront than after the fact. So I think if we could articulate that, that would be good. I think that's it for now. Thank you. Great. I don't think I have anything unique from what other members said, but I'll repeat that I appreciate that this provides significant predictability and consistency. We're sticking with what we had said this year would be that provides predictability and consistency. There's a lot of clarity at it to the regulated entities so that they know what the factors are and what we're gonna be looking at. And there's a lot of fairness that's being injected into the process. So I think that this is a good direction and improvement. I like that we'll be considering information about similarly situated hospitals. And so we'll have a really fair and predictable and robust evaluation process. So I appreciate the work that it took to get here. And thank you. I'll turn it to the healthcare advocate. Sure. Quickly, we also, as was expressed by member Holmes and member Lunge, support the idea of moving, seeing this as a transition year and developing effective metrics or more effective metrics in 2025. I think we've heard from the public comment and their own issues that we'd love to see a metric for affordability. I think for FY24, the best we can do is the relationship of free care and bad debt. I have thought a little about this and the United States of Care, which is founded by ex Obama and CMS administrators is interested in presenting to this board. And what I need is the next step is, we've had a general expression of interest by the board of looking at this. In order to be able to move forward, I need to, we need, the our office needs to be able to give the United States of Care a date certain and a clear mandate of what the board would like. So I hope we can continue to move this discussion forward on developing an affordability metric before our busy season starts. I know there's a slight difference in board busy season and my busy season, but I think we need to see this as the moment to strike before the madness ensues. Thank you. And I'm aware that the board had a non-busy season, but I'm looking forward to getting to it. It must be next. Coming right up. So they keep telling me. Okay, we'll turn to public comment. Mr. Ham Davis, please go ahead. Thank you, Mr. Chairman. It's got two or three comments. I really don't know how many questions. I think that the, that everybody's gonna be looking at the work by the work they have on his hand here. Basically, this is the third. This is the third, the third Green Mountain Care Board. And we're starting to see what it really all looks like. It's been different, it's significantly different from the other two Green Mountain Care Boards. So it's very, very interesting to watch. It's been really a system that's been running since 1983. I've been to, kind of the other day and I've been to 1200 of these meetings. That's really kind of scary. Just so just a couple of comments on the new, what I think about is the new board. One of the remarkable things I think anyway, is that the material you get, the board is getting to work with is better, that better than it has been for years. I mean, I think that Ms. Lindbergh doing that is national class work. And that's a real plus. Secondly, I just have a comment. I think that it's gonna be very difficult. I think that with the best will in the world, there's gonna be a very difficult thing to treat this board, this system, this 14 hospital system as a single system. The reason is that the UBN network with 60% of it is so different. It's a completely different model from the non-network network, if you can call it that. And I think trying to make a system that works that considers all 14 in one box, I think that will be very, very, very hard to do. In my view, impossible. I don't care whether Sarah Lindbergh's national class. I mean, it's just very hard to do. And so the, I think you really ought to think about that. The danger in that and treating it all as one system, okay, is that granted all the difficulties with UVM, if UV, if you, if what comes out of this, even in 24, even though it's considered a transition year, if it's simply can't be, if UVM can't function with that, with what they get out of all of this, then this whole system is in terrible, terrible trouble because UVM, whatever you're with, you like it or not with you, and they certainly, UVM certainly has plenty of problems. But if they can't function, okay, then this whole system can't function. So that's what I would just watch, I would just watch for. I think it's a real risk, it's a huge risk, trying to throw these people, all these 14 hospitals, one of which is a small but national class academic medical center in with Grace Cottage, whose average daily census, according to the data that's never really been brought up to the public before, is average daily census is one, that like one as over, just a little bit over zero, is these huge differences between these structures. Anyway, thank you very much. Thank you for your comment. Walter, how are you, I see your hand is raised, so please go ahead. Hey, Owen, spending a beautiful Wednesday at the Green Mountain Care Board, what else could you ask for? Nothing. Yeah, nothing, that's Nirvana, right? Sure is. I first back up Jess in her comment to Sarah and saying if I had to do all that data, I would be in one of those addiction centers. And I also wanted to thank Eric about the, Eric shows us about the metrics for affordability, because that's what's been missing here so much. You know, like I live in public housing now, because I can't afford rent anywhere else. And even though I'm a working stiff, and they have a metric, you know, it's something like 30% of your income. And because what's affordable to one person, you know, is not affordable to another. And that's a huge problem. So thanks to Eric for that one. Thank you. And agreed that Ms. Lindbergh is national class. We get the benefit of that every day. And I'm so thankful for it. And I know all the board members are. Mr. Del Treco. Chair Foster, thank you for the opportunity to talk. And I know I submitted a comment letter and I appreciate the opportunity to do that as always. And thanks for commenting on some of the things around predictability. You know, it's very important to us. Sarah again, really nice work. Some of the things I understand, some of the things I don't understand and I will go back and look at those more deeply. One of the questions that I have, and I understand where the 86 comes from, but we're seeing net patient service revenue well over our budget targets in 22, I think 23. We're going to experience some of the same circumstances. I don't know how and when things will level out. It's, there's a lot of uncertainty as you know, in this new space, maybe at some point in time we'll hit a cliff and maybe we won't and we'll continue to rise. One of the things that I think about as you lay out your parameters or discussions around growth, if we're talking flat growth from 23 budgets and we already know that we're going to be at or maybe even over that 23 budget line item and we have a system that's very financially frail with 8% margin. You know, the math starts to get really broken pretty fast. So again, appreciate the thinking around predictability and making sure we as the industry understand how you're measuring us. But I'm wondering if the, I know the 22 basis higher than where, you know, because the net revenue growth and that line item, but it seems to be insufficient to cover what, what we know are going to be operating expenses that are 8 plus percent. So thank you and I appreciate the time and I certainly appreciate the opportunity to have public comment. Great, thank you. And one thing I actually meant to point out was there were a couple of public comments that I thought were important. One was from VAAS, which we received last night and then one came in this morning from Health First, which I think both of them are important to consider in this process. I'm not sure if everyone had a chance to see those, but I wanted to point them out. Any other public comment? I know there's a potential vote notice, but I don't think we're quite at that point yet. So I'm going to hold off on that. And I see a lot of heads nodding and shaking. And okay, good. Well, Ms. Lindberg, thank you very much. And I appreciate this a lot. I'm going to turn it over to member Walsh. And after this presentation, we'll actually do the executive director's report. I wanted to take it out of order because people had some things they had to get to. So member Walsh, if you'd feel us a favor and introduce Mr. Shrensland and his work at MedPAC, I'd really appreciate it. Thank you, Chair Foster. And just some brief context, as Sarah has pointed out when we're going through guidance, we're updating and improving our regulatory oversight processes. And part of that's been reviewing the evidence surrounding the way that we understand budgets and the way that we make decisions. An area where we found there'd been a lot of changes in recent years was surrounding the idea of cost shifting. And as we've realized that the evidence around that concept has changed substantially, particularly in the last decade, we wanted to educate ourselves and then share what we've been learning. Part of my journey learning about this has been reading material that starting with Mr. Shrensland. I've never met him before calling to see if he'd speak with us, but I found his work to be insightful. I appreciated his willingness to question assumptions and really try to figure out ways to better assess what's going on around us. And so he's done some very impressive work. I'd like to say a little bit more about him. He is a principal policy analyst with MedPAC, that's an independent federal body that advises the US Congress on issues affecting the Medicare program. His research overall includes hospital payments, geographic variation, rural health, and physician hospital integration. Prior to joining MedPAC, he was a senior research director with the Project Hope Center for Health Affairs. He has extensive experience conducting research on the financial performance of hospitals and rural health issues. His findings have been published in health policy and healthcare financing journals. In addition to his research experience, he's worked in the banking industry as a financial analyst and holds the Chartered Financial Analyst Certification. Got his PhD from the University of Minnesota and in addition to applied economics at a minor in health services research and policy, I just wanna point out when I phoned him, he very quickly responded and without hesitation, agreed to speak with us and then has been very gracious and flexible this afternoon. So with that, I'd like to welcome him and I'm looking forward to hearing his presentation. And board member Walsh, I am looking for Mr. Stensland and I don't see him on this call. We have been communicating with him. So that was a lovely introduction that I think he will hear later. So one moment please while we locate our speaker. I apologize. We can take a five minute break. We've been going in hour 15. So while we take a five minute break, we'll come back. That would be great. Thank you. Thank you, 22-ish, a little six minute here. Thanks. Here, we see you now Mr. Stensland. We just took a quick break, but this is good. We can get you all set up. You are on mute, Jeff. And we're not, yeah, we do have some folks in the background here, but we have taken a five minute break. We're gonna come back at 2.22. I don't know if you heard your lovely introduction from board member Walsh. I did not, but I'll- It was lovely. Oh, good, okay. We have it recorded, so you can always listen to it. So we can try to put up your slides. Should we try that, Jean? Yeah, that's what I was gonna say. Are you gonna do it or do you want me to do it? Would you wanna see if you can do it so that way you can control it? Then you can drive. Oh, let's see. You should be able to, I think- Let's see if I have a- Yeah, so you look at the share button. It's right to the left of the leave button. Only meeting organizers and presenters can share, okay. Okay, I thought we had made you a- That's okay, we can do it. I think I can make you a presenter just for a second. Okay. And just one moment, please. And if not, we can always just do them for you, but let's see if she can do it. She's a wizard. Okay. Now give it a try. All right, let me see. All right, you see it? You still don't see the slideshow on there. Share from my end, and then you can cue me, hang on one second, let me just make sure I can find it all. So many emails today, just one moment, please. Okay, just one moment, please. There we go. How does that look? Does it look good? Perfect, yeah. That looks fine, yeah. So do you wanna just leave these up and then Jeff can go write it to 222 when we come back? And Jean, you don't mind forwarding? No, not at all, not at all. Just let me know if it's good. Yeah, you have a good connection. You're in the office, I can see you. Okay. Okay, so we'll wait until Shira Foster gets back. Okay. And then we'll start at 222. Thank you so much for your flexibility today. Sure. It was a little later than we had expected, so. Well, hopefully you got great things done for Vermont. We do our best, that's all we can do. We have a great board, they work very hard and staff. And Vermonters who work very hard, so. Now I'm afraid I'm gonna leave anyone out. Tom, so Jeff did not hear your lovely introduction. So I told him he could listen to it on the replay, but he's here, he's all set up and Jean is gonna be forwarding his slides for him. Oh, good. Yeah, thank you, Jeff. Sure. Again, for your flexibility and graciousness in joining us. Sure. I think everyone, board members are here as board member homes returned. There she is. We have the full board back, so why don't you, if you would please, Jeff, go ahead. All right, I miss Tom's introduction, but I'll give you a little bit of background. I'm a staff member of the Medicare Payment Advisory Commission. And what we do is we advise Congress and CMS on Medicare payment policy. So issues such as how much should Medicare pay? How should Medicare pay? And part of the reason is naturally providers come in to talk to their congressional delegations and say we need more money and they wanna know what kind of empirical evidence is there for that and should they raise the rates? And if they raise the rates, what happens? And one of the big questions is well, what would happen to commercial prices if Medicare increased its prices? And what would happen to cost if Medicare increased or decreased its prices? And that's what I'm gonna talk about today. And it's kind of this debate, which I call cost shifting versus revenue shifting. Some folks would call it cost shifting versus price discrimination. I mean, go to the next slide. So kind of what's driving this is common concerns. There's this overarching concern that private insurance continues to rise in its price. And part of the reason we see is that there's continually increases in the cost of hospital care, the healthcare cost institute reports that prices charged by hospitals for a significant part of the recent years increased faster than input prices. And there was a general agreement in the literature that when hospitals have more market power, they're gonna charge higher prices. And as we see hospitals continuing to consolidate, there's this question about are these price increases necessary and as their reasons other than the market power for these price increases. And kind of the overarching question for today is when will hospitals use their market power? Will they use it all the time to obtain as high a rates as they can? Or will they only use it when they absolutely necessary need to use it to cover their costs? And that's related to the next question on the next slide. Is why do hospitals losses on Medicare patients and private payer prices tend to go up in tandem? There's two hypotheses for why this happens. There's one is the cost ship hypothesis. And this fundamental idea behind this is that hospitals will only use their market power when they're forced to. When they have to raise prices to meet rising costs. And the general ideas behind this first hypothesis is that hospitals input costs are outside their control. Also, that Medicare and Medicare rates are below their costs and force them to use their market power to raise private prices. And the general conclusion here, and what you get from a lot of industry lobbyists will be that Medicare losses are causing the high commercial prices. That's the cost ship hypothesis. But there's another hypothesis that I discussed in my health affairs article in 2010. And that's that hospitals may use their market power to increase revenue beyond the minimum needed for their operations. The idea here is that costs are not fixed. And when hospitals, particularly non-profit hospitals have higher revenue levels, they spend that revenue resulting in higher costs per unit of output. And these higher private payer profits can then cause higher hospital costs. And the higher costs can then cause the losses on Medicare patients. So in this sense, the higher private prices cause losses on Medicare patients through the higher costs. Now, I don't wanna be dogmatic here and there's a middle path also. We're a little bit of both of these two things or some of one and some of the other could be true at the same time. So the next slide tries to make this a little clearer by having a graphic. And in the cost shift hypothesis, we start with Medicare prices below costs. These are the Medicare losses that causes financial strain. Then hospitals are forced to have high commercial prices. So this is the Medicare losses cause high commercial prices hypothesis. The second one is a different chain of causation. Here you have hospitals with market power choosing to increase their prices and they have high commercial prices. The high commercial prices then allow them to have higher costs and the higher costs then result in Medicare losses. And in this chain of causation, it's the higher commercial prices that are causing the Medicare losses. So in the next slide, we'll talk about this inverse relationship between margins and the commercial patients and Medicare margins. And we generally see an inverse relationship. And in recently, if we look at the 2021 data, Medicare paid on average about 94% of hospitals allowable costs. That's allowable cost meaning I could get into that later on question if you wonder what's allowable and what isn't but it's most costs. So what that means is that there are a few hospitals that make money on Medicare but most hospitals are losing money on Medicare. In contrast, private insurers pay rates that on average are over 150% of hospitals cost on average. So what that tells us is that on average, some private payer revenue pays for Medicare patients. But of course, the question is why is that happening? So in the next slide, I talk about two conflicting hypothesis and to see if we can bring some data to bear on which one of these hypotheses is more plausible and which one fits the data better. The first question I wanna test is, are the costs exogenous or do they vary with hospital revenue? And the cost shift hypothesis is that they are exogenous. The hospitals have their costs and they're just forced to pay those costs. Maybe they could reduce service lines but whatever the cost per unit of service is is beyond their control. The revenue shift hypothesis is that wealthy hospitals will have higher costs and the hospital revenue will affect their cost per unit of service. The other question to test is which hospitals will be under the most financial strain? Under the cost shift hypothesis, hospitals with higher costs and low Medicare margins will have the lowest all payer margins. As these costs are out of their control and for some reason they're in a market where they have really high costs and then they have really low Medicare margins, they're gonna be in financial difficulty overall. The revenue shift hypothesis is quite different. Here you're gonna see that hospitals under financial pressure will have lower costs. So these lower cost hospitals will have higher Medicare margins but they may have a lower all payer margin because again, these are the hospitals that don't have the market power to generate high commercial profits or maybe just don't have many commercial patients period. So these are the two empirical things that I went to test and I tested these back in the 2010 paper but I'll give you some more recent data now on the next slide to show you that from 2010 to 2019, really the story hasn't changed much. So the first conclusion I came to is the costs do vary with pressure and I wanna explain this slide a little bit. There's two different columns. The first column you'll see is called low pressure hospitals. These means they don't have a lot of pressure to make money on Medicare patients. They have profit margins of over 5% on their non-Medicare patients and their equity, their net worth is growing over time. In contrast, I set up some high pressure hospitals. These are hospitals that are making less than 1% on their non-Medicare patients in aggregate. This means they're commercial, they're Medicaid, they're uninsured altogether on average is generating less than 1% margin for them. So they're under a lot of pressure to constrain their costs and make money on Medicare. So let's look at what their costs actually are. In terms of the nonprofit hospitals, we see a pretty big differential. Those hospitals under low pressure have costs on average that are 106% of the national median. There's also a medium group here that I'm not looking at just to contrast the low and the high group. Then if you look out of the right-hand side, you'll say, well, what about these high-cost hospitals? These hospitals that tend to, you really don't have the payer mix where they're making much money on their non-Medicare business. Well, their costs are substantially lower at 97% of the national median for all hospitals. That's on the nonprofit side, but the for-profit side is different. You'll see the for-profit hospitals tend to have substantially lower costs, meaning that they are restraining their costs even when they have relatively high margins on their non-Medicare business. And for example, if you look at the Hospital Corporation of America, the biggest for-profit chain, it's total all-payer margins in recent years have averaged around 12% before taxes, and that has allowed them to do things like spend billions of dollars on share buybacks. So for the for-profit hospitals, it's pretty clear that they aren't following the traditional cost shift story. They've constrained their costs and they've raised their prices enough to generate 12% margins and they weren't forced to do that because they didn't spend that money on patient care, they spent it on the stock buybacks. And we'll look a little bit more at the non-profit hospitals, which we have one more hypothesis to test. So let's go to the next slide. So here is, we wanna look at, well, who's in better financial shape? Are these low-pressure hospitals, which tend to have high costs and really big losses on Medicare, do they tend to have higher or lower overall profit? And we'll see that these hospitals that have a non-Medicare margin of 14%, their standardized costs as a share of the national median are 104% and they're generating a big negative Medicare profit margin and they have a strong all-payer profit margin at the median. On the high-pressure group, we have a very different story. These are hospitals that aren't making money on their non-Medicare business, had a negative 3% non-Medicare margin. Their standardized costs were below the average. So they had lower costs, but despite having lower costs, that allowed them to have a big even on Medicare, but they still had a negative overall margin despite constraining their costs because they just didn't have the higher profits on the non-Medicare business. So far, what we've seen is that these high-cost hospitals that tend to generate money on strong profits on non-Medicare patients have overall higher profitability. And this is a little contrary to what you would normally see. You wouldn't see the high-cost producer having higher profits, but that's what you see in this case. So we'll go to the next slide, because that's just me looking at the, the kind of a set point in time. What are the costs related to the profit margins for these different types of hospitals? So you could see that as like a cross-sectional analysis, just a snapshot in time. But a lot of what we have to do at the Medicare Payment Advisory Commission is advise should Medicare rates go up or down. And so the question is, well, what happens over time when Medicare rates increase? What happens to costs? What happens to private payer rates? And there's an academic literature on this. We'll start with Vivian Wu in 2009. She estimated when the Balanced Budget Act of 1987 provided some cuts in hospital rates that 21% of those cuts were passed through to private payers through higher prices. So there was a little bit of increase in private prices was her hypothesis. Austin Frackman did a literature review, where he did a broader review of the literature, and this came out after my paper. And his conclusion was a $1 cut in Medicare prices leads to at most a 21% increase in private prices. Because largely what was happening was a reduction in costs when their Medicare revenue decreased. Then Chapin White, who was a researcher at RAND, did some work and his findings went the other way. He said lower Medicare prices tends to lead to lower private prices. And this is the opposite of a cost shift. And his hypothesis was that a lot of hospitals contracted with insurers as paying a percentage of Medicare. Maybe we'll pay 1.5 times Medicare. We'll pay two times Medicare. So when Medicare goes down, what they're getting from the commercial payers also went down. There's also the effect of when Medicare goes down, maybe they want those commercial patients even more because those commercial patients are relatively more profitable compared to Medicare, and they may be willing to bargain a little bit lower in order to get a bigger volume of their commercial patients. So then more recently, Zach Cooper did the flip. He said, you know, these early studies often looked at what happened when, the first couple were what happened when Medicare prices went down. Chapin was what happened when Medicare prices went up or down looking at changes in Medicare prices for different areas. And Zach Cooper had like a little natural experiment where there was a 508 wage index change. And what happened here is when the Affordable Care Act was passed, certain areas got a big boost in their Medicare wage index. And that made, they got a big boost in their Medicare revenue. So he wanted to say, well, what happens when they get this big boost in Medicare revenue? Because essentially it's a big price increase. And it happened in largely, you know, big political geographic areas. So you could see, well, what happened in the area got the big increase versus these areas that didn't get any 508 increase. And what he found is that largely just resulted in higher costs. You did have some more capital expenditure. You had some more employees. You had higher wages, higher executive salaries. All of that happened when the Medicare payments went up. He didn't see the hospitals saying, well, we got more from Medicare. Now we can call it Blue Cross and say we don't need to get quite as much from them. So the general agreement is that lower Medicare rates primarily result in lower hospital costs. So this is lining up mostly with the revenue shift argument. Though the earlier study by Vivian Wu said there might be a little bit of the cost shift in there too. But it's largely revenue driving costs. Let's go to the next slide. So of course we can't just continue to reduce costs because at some point you're not gonna be able to provide high quality care. So the question that our commissioners often want to know is, well, if we raise rates by 3%, will that be enough for relatively efficient providers to provide high quality care in their markets? That's what they wanna know. So we wanted to look at some relatively efficient providers. These are providers that did relatively well on costs and on quality, meaning mortality and readmissions. And we wanted to see how well were they able to do in terms of constraining their costs while still maintaining relatively good quality. And one important thing of the way we do it is we identify hospitals as relatively efficient in 2017, 2018 and 2019. And then we look for a later year to see how they did in their costs per case. All right, we go to the next slide. So this one looked at hospitals performance in 2021 for hospitals that were performing well and looked relatively efficient before the pandemic started. And we wanna look at these relatively efficient hospitals and we had a group of 284 of them and their mortality rates were about 11% lower than the national median. The readmission rates were 7% lower. Their standardized costs were about 10% lower. And the share of patients that rated the hospital highly was 71%, which is a little bit above the average for hospitals. And on average, they were breaking even on Medicare before the provider relief funds in 2021. And they had fairly strong total margins of 11%. But you might notice that they had 11%, their total margin was only 2% higher despite having costs that were 13% lower. And that's because some of these other hospitals are gonna be having higher private payer revenues, higher overall revenues. And that could be affecting part of their costs and why they're still able to maintain a relatively high margin despite having the higher costs. And we can go to the next slide. So just to kind of wrap it up, what we've seen is that the hospitals under financial pressure do constrain their input costs. And I wanna say that these costs can't go down and down and down. There's a certain limit to it. And if you look at what the data that we've seen, there's kind of three different ways to look at it. And I've talked about some of that today. These relatively efficient hospitals have costs that are maybe 10% below the average, showing that it can be done. If you look at the hospitals under financial pressure, those that don't make much money on non-medicare patients, their costs were about 10% below the average. And if you look at the for-profit entities which have a for-profit incentive to keep their costs down and you see a lot of this incentive coming from HCA and certainly the private equity-owned hospitals, their costs are maybe 10% lower, sometimes a little bit below 10%, but that seems to be about, from looking at this from three different angles, about as far down from the averages you're going to be able to move the costs. So then we're gonna say hospitals with strong market power are still under less pressure to constrain their costs. They have higher non-medicare profits and they have higher costs. So this is the revenue shift hypothesis or the price discrimination hypothesis that has the most empirical support from what I did and what's in the literature. And from our standpoint is kind of one of the take-home messages that these higher costs can lead to losses on Medicare patients. And as a kind of a side note, if anybody looks at the old 2010 paper is, we also had some examples in there because sometimes an example is useful to look at. And at that time we looked at, well, what's happening in the Chicago market and the Boston market where there's lots of hospitals. And you could see both in Chicago and Boston, there was, and in Boston we knew because the Massachusetts shows the different rates received by different hospitals. And so a hospital that we're receiving relatively high rates, tended to have very strong margins, more than a billion dollars in financial reserves and very negative Medicare margins. So the idea there was it looks like the high commercial profits allowed them to have the higher costs and to generate a billion dollars in reserve. It wasn't the billion dollars in reserve that caused them to have the, forced them to have high commercial prices. And we saw something similar in Chicago where you just see much higher prices and much higher costs at kind of some of the dominant hospitals that are getting higher private rates. I'll just open it up for any questions or clarifications that you might have. Thank you, Jeff. Appreciate you walking us through that. And just in my own reaction, even hearing you again after having read your paper and the others that are mentioned, this is such a paradigm shift from the way that most people have experience with thinking about the cost shift that experience tells us that Medicare pays less than what we'd want, less than what we believe our services cost. Therefore, we're compelled to increase the prices to commercial payers. And what your data and the other, the other evidence that you mentioned and still more, I believe, tell a different story. It says instead of being compelled, hospitals that have sufficient market power raise their prices to commercial payers. The revenue generated allows them to increase their staff size, increase their administrative budget, increase their infrastructure, which then appears to be a higher cost of care, which then appears as though a bigger loss with Medicare. And so if I've messed that up, please clarify, because it's the complete, it's a complete flip of the paradigm. How did I do? I think that's accurate. I would just say that I would call it the dominant factor and there still could be a little bit going the other way. There could be a little bit of, oh, we had a big drop in Medicare revenue, we're gonna push a little bit harder in our negotiations, maybe willing to lose a little bit of volume by getting a higher price. But generally, that effect is very small compared to the other effect. So it's primarily revenue driving costs rather than cost driving revenue. Thank you. And you're sharing with us the 284 efficient hospitals. Those are 284 facilities breaking even with Medicare reimbursement, correct? That's the median one breaks even. So half of them are making money and half of them are losing money and there's always some variance on whether you're going to make money or lose money on Medicare, depending on whether you're getting special payments, are you getting teaching payments, are you getting dish payments for having lots of poor patients, are you getting lots of uncompensated care payments? So there's some variability in that. But in the middle of that pack, they were breaking even, meaning their Medicare revenues were about equal to their allowable Medicare costs. And there's certain costs that aren't allowable, usually about one or 2% of costs that are things like for lobbying or some interest expense that's offset by interest revenue, those kinds of things. One of your sides also talked about responding to pressure. Hospitals that are under financial pressure, either via competition regulation, are able to constrain their costs. Correct. And I think that's very clear that when they're under more financial pressure, their costs will be constrained. And then the question is, how low do you really want them to constrain their costs? Are they gonna be able to continue to provide high quality given how low their costs are constrained? And they're certainly, our analysis would suggest it is possible to generate relatively high quality care with costs that are below the average across the country, but not hugely below. So I don't think you're gonna be saying, oh, you can reduce your costs 20, 30% and still provide high quality care. I don't have any evidence of that. But for the average hospital with an average level of market power and average non-medicare profits, it may be able to reduce its costs by 5%. Thank you. I appreciate you helping us with that. Chair, should I return to you for the rest of the questions and public comments? I'm more comfortable with you doing it. This feels awkward. I'm kind of enjoying watching someone else do it. This has been nice. I love it. You're doing a great job, Tom. We can just, yeah. Well, any board comments, we can go again in the same order. Dave, Jess, Tom, if you have additional, Robin and myself. Well, thanks, Jeff. Dave Merman, I'm one of the new mountain care board members. I'm also an emergency physician. And this actually, I read your paper a few months ago and several other accompanying papers. And it's something that resonated with a lot of my experience over the years. I went to medical school in Boston at Tufts, which I think is known to be in sort of, this complicated milieu of the Boston market as a very high acuity hospital without much, without the market power that other hospitals had. And there was, oh, some articles in the Boston Globe in the mid-2000s around the beginning of my time at medical school, early 2000s. And I think Martha Coakley, the attorney general of Massachusetts did an investigation that Tufts was somewhat involved in because it turned out that they were a very high acuity hospital. They got lower reimbursements than the other hospitals in town, which have a lot more market power. And then I did residency at the hospital in town with the least market power. I went to Boston Medical Center, which was the formerly public hospital. And it was pretty amazing to me from there that subsequent hospitals and other hospitals I worked at in residency, how efficient that place could run on a really, really, really bad pair mix. And I think that that's sort of informed my personal experience when I came across your literature. It definitely resonated from there, going to other hospitals and other parts of New England, which had some more market dominance and seeing how different, just from the provider standpoint that can feel. So I really appreciate your coming to speak with us and your contribution to the field. So thank you. You're welcome. Member Holmes. Yeah, thank you so much for coming. I really appreciate it. I guess it may be one of my questions, and I know we have a hard stop at 315, so maybe I'll just ask one question, knowing that others wanna talk, we wanna open it up for a public comment. I'm really intrigued by the causality argument. And as I was thinking about it, how do you impact quality? I guess how do you incorporate the impact of quality? And I guess I'm gonna throw this idea out there. Your suggestion is increased market power, increases, commercial prices, leads to weaker cost control, leads to higher cost per discharge, leads to thinner margins on Medicare. If the story was the following, would your data stay the same thing? Some hospitals are choosing to maximize quality. So they're hiring the best and the brightest physicians and providers, they're buying the latest and greatest technology, their quality is measurably better in terms of human resources and technology. That leads to higher cost per discharge, right? Which potentially though, could also be associated with higher market share because of the quality component. More commercial patients are gonna be wanting to go to that hospital with a higher quality. The combination of higher quality and higher market share leads to higher prices, which then would lead to higher all payer margins. And potentially if Medicare is not paying for quality, lower Medicare margins. So I'm just wondering, how do you with the data that you were looking at distinguish between those two possible scenarios? As a, you know, almost as a third scenario. I think either one of those can hold. And I think that's why we go to the efficient provider analysis of saying, well, are you able to do both? Are there some places that are able to have relatively good quality and relatively low costs? Not particularly low costs, but slightly lower costs. And I think that answer is yes. So that would imply to me that it's not being driven purely by the quality metric, that there's not some sort of a one-to-one relationship that if you're going to have higher quality or high quality, you have to be one of these high cost hospitals. Right, okay. And then my second question really just, I'm always intrigued by also, you know, in the cost shift hypothesis, the assumption that hospitals are not profit maximizers, right? They choose to maximize profit sometimes and others. And I guess I'm sort of wondering the same thing here. So if the relationship is higher market power, higher commercial prices, higher revenue from private payers leads to weaker cost control, why aren't these hospitals profit maximizers? Higher leverage, higher prices, yes, but then why not have strong cost control across the system so that you're maximizing profits? I think that's pretty much what we see with the for-profit hospitals. On the non-profit side, I don't think we see that. There is kind of, if you're a non-profit hospital, what are you gonna do if you're with that extra money, if it just keeps on building up? And as a hospital administrator, is that what you want? A hospital that has a giant, and most people then start poking at, or would you, are you gonna think, oh, there's things in this, I would like to do. I would like to hire more people. I would like to have newer buildings. I would like to get a raise myself. There's lots of things they might wanna do with that money. And I think that's kind of what we see with the Zach Cooper article of what happened when they got a pile of money. What did they do? And so I think there is this idea that the for-profits seem to be maximizing profits and that's their dominant goal. I think the non-profits and a lot of literature would say maybe they're trying to do something else. Maybe the leadership of the hospital wants a bigger organization. They wanna provide more services. They wanna give their people raises. They wanna get themselves raises. And I think a lot of them are trying to do good things. They're not thinking that this is, it's not purely selfishness. There is as, if you do look at the compensation studies, the bigger you are, the higher your compensation is an executive of these hospitals. It's not tied to your quality. It's tied to the size of your organization. So you have a personal incentive to do it, but I don't think it's all personal incentive. I think it's, they wanna do good things for their employees. They wanna have a bigger organization. They would like a new building. I can tell you when I visit hospitals, I've only had one site visit on a hospital where he said, let me show you the wing I shut down. And everybody else wanted to show me the new wing they built. So I think they're, I just wanna say it's not, I don't wanna make it appear like there's something nefarious going on here. It's like they are trying to do good things for their community, good things for their employees, have a new, brighter, bigger building. But it might not necessarily, they might not necessarily have to do all of that stuff to continue to provide good quality care. I think this is like, as I think David said about the example in Boston, that there could be more than one hospital providing good quality care that doesn't necessarily have to be the highest paid hospital. Thank you, it's really fun to hear from you today. Your lunch. Thanks. Thanks so much for joining us. My questions are really an attempt to try and apply it to the Vermont specific market situation. We don't have for-profit hospitals. We have 14 non-profit hospitals, only five of which aren't critical access hospitals. So one of the questions I had is I thought I had read and please correct me if I'm wrong in your paper that you did not look at critical access hospitals. Am I right there? Yeah, I didn't look at critical access hospitals for two reasons. One is their incentives are different, certainly on the Medicare costs side because they're getting paid their costs. And the second is that there's a lot of detailed differences in how they actually do their cost accounting. So actually, if you have exactly the same thing happening in a PPS hospital and exactly the same thing happening in a critical access hospital, your cost per discharge would show up differently if you use the critical access cost accounting rules than the prospective payment cost accounting rules. So for that reason, we don't put them in the same bucket and compare cost per discharge for a cost per discharge for a PPS hospital. You could probably do a separate analysis where you looked at the critical access hospitals and look at their relative costs. The easiest thing to do there is look at how much are they paid for post-acute swing day because some get $800, some get $4,000. So there has to be some difference in their cost structure of somebody saying it costs them $4,000 for a day of care and somebody else says it costs 800. Sure, yeah, no, that makes sense. And we have had some analysis done using the cost reports related to sort of relative costs. The other question I had is it's founded to me quite frankly for both definitions that it's relying on a negotiated commercial price and a competitive marketplace. Whereas in our system, we set a cap on commercial prices and a cap on revenue growth. So I know you're not that familiar with our budget process and I certainly don't wanna put you on the spot, but I think that then creates a little bit of a different market dynamic than perhaps in an unregulated market. But I'd love to hear your comments on that. Yeah, I think it's different from my story. And to me, if I was sitting in one of these chairs I would be happy to have to think about well, how much do they need to provide good quality care if they're doing it efficiently? And then you would probably have to benchmark what their costs are against similar providers and see where their costs are and how their cost structures are different. And I also wouldn't demand anything change quickly. This is kind of beyond my scope in that I think it's very hard. I have a lot of sympathy for these hospital administrators if somebody says, oh, just reduce your costs immediately. I think that is just me not plausible. I wouldn't expect that of them. But you may say, well, we think that if your costs are a lot higher than comparable hospitals, we think that the rate of increase in your costs we can try to make that slower than the rate of increase that competing hospitals are getting from whatever their payers are. So kind of you're moving toward a more similar cost structure to other hospitals, if your hospitals are starting out at above and I don't know if that's an analysis you would have to do. Thank you. Member Walsh, do you have any other questions or comments? Sure, Jeff, thanks for bringing up Zach Cooper. He's our next guest speaker. Oh, fantastic. And specifically to try to help us understand this quality relationship a bit more because the thing that fascinated me about his research was also you talked about hospitals responding to pressure and reducing their costs. He found hospitals in competitive markets under competitive pressure also raised their quality. While keeping their costs down. So it's not the only mover, but the primary force appears to be the pressure. And where does that, how do we generate that or where does that come from? I think is an important thing for us to consider or anybody in a very rural state. Yeah, it's gonna be true. Yeah, if it's the British study that I'm thinking of that he did, maybe it's a different one, but that also kind of relies on having competing hospitals you know, compete with each other for quality to get the greater referral volume. And you're in a more difficult spot there and that you probably don't have a lot of competition between hospitals and a lot of your markets. Right, and so we need help thinking about that situation and that's why I reached out with you. I also wanted to thank you for talking about the value of comparisons just before you our director of hospital budget, our hospital budget process has been, she's been introducing us and the public to an approach that she's advising us on which contains a lot of comparisons, exactly like you mentioned. So we're trying to be respectful of the unique setting that we're in, but also make sure that like we want of our clinicians, we want clinicians who are evidence-based. I think it's incumbent upon us as regulators to be striving for evidence-based regulation and looking at the evidence and thinking deeply about what's unique about our situation, how can we apply what the evidence suggests would work and you've really helped us launch this public discussion. So thank you very much. You're all welcome. I just had, I think, one, I'm mindful of the time here, but Mr. Strindland, you spoke about pressure, but I wasn't really clear on what that is or could be. Well, in the hospitals that I'm looking at, the ones under high pressure were ones that if you look at the sum total of all their non-medicare business, they were making a margin of less than 1%. So they were under a lot of pressure to not lose money on their Medicare business because they weren't making money somewhere else. Whereas if you're making a 10% margin on all your non-medicare business and your Medicare business is maybe a quarter of your business, you're not so concerned about what your Medicare margin is. You would like it to be higher, but you're not under a lot of pressure to reduce it. And if you do reduce it, if you do reduce your Medicare costs, your overall total margin is gonna go up and you're gonna have this bigger pool of extra dollars and then what are you gonna do with it if you're a non-profit hospital? Are you gonna, you're not gonna just let it sit in the bank forever. Though I did talk to one hospital who said the goal of their, their primary thing that they were doing with their endowment was to grow their endowment, but I think that's an aberration. And then this may not be your field of expertise, but I was curious in terms of any resources you knew of about the strategies or tactics that have been used by those low cost hospitals, low margin hospitals to keep costs down. How are they doing it? Or how could we think about our hospitals doing it? Yeah, that's probably beyond me. There's some places you could certainly talk to, probably on the inpatient side, maybe Virginia Mason or Scott and White in Texas has always generally had a relatively low cost structure. And it's kind of a hospital that does tertiary care in a somewhat of a rural environment. So I would think of that as kind of a somewhat comparable, but that's, I think you'd talk maybe like the hospital consultant types like Eric Schell might have some ideas on who he's seen make turnaround since that's kind of his business. Right. And we actually had Mr. Schell present to the board earlier this year. We have everybody coming in. That's good. We do, we're learning a lot. So we really appreciate you taking your time to do this. And a huge thanks to member Walsh as well for this is sort of his brainchild and his development. So thank you, Tom for putting this together. And Jeff, thanks so much for being generous with your time and spending a little time with us. We appreciate it a lot. So one quick thing, but I think before I let you go, we take comment from the healthcare advocate and the healthcare advocate may have questions and then we'll do public comment. So Eric, please go ahead. Thank you, chair. I'm just curious. So like we talk about, and this is a question really. So we talk about market forces and underpinning that is this notion of supply and demand, but it seems like we're maybe partially dealing with some type of a situation where there would be a market failure. Like if I think about how I consume healthcare, it's not like I make a decision to purchase a car or purchase new roofing materials that in some ways it's not a normal good. It's not like my decision to purchase a widget. And I wonder how that complicates this analysis from the, and if we look at the demand side of it. Yeah, I think it complicates it in that you have to have local access to basically a high level emergency room. And so it's not like widgets where if my local provider is charging me a lot, I'll just go buy it from California. You're gonna be buying it from your local provider. And I think that's what creates a lot of the market power that we're talking about. Thank you so much. That's all my questions, chair. Thank you. And thank you folks for being mindful of the time. I'll turn it to public comment. And again, we have a 315 hard stop. So we'll try and keep it moving. Ms. Gutwin, please go ahead. Thanks. So with nonprofits using profits to expand an expansion eliminates competition, it does go counter to cost containment. I just, you know, I think we need to remember that. And also high quality isn't what a hospital has to offer, but outcomes the hospital presents. So if hospitals without the latest greatest can get equal outcomes, then I think that's important to remember as well. And then one last thing, last year in a report to Congress MedPAC reiterated its recommendation to base payments in part on the most efficient and lowest paid setting rather than the current system, which incentivizes care on the highest paid setting. So for almost a decade, MedPAC has recommended site neutral payments, which give patients more flexibility in selecting sites of care and the reimbursements across settings would basically remain fair and help the health of the entire system. I just wanted you to comment on site neutral. Jeff, if you could. Sure. So we've had some recommendations on site neutral for a long time. And the idea is that if something can be provided safely in different types of settings, we want to pay the same level of payment for those two different settings and you will see volume going to the lower cost setting. I think the hospitals would argue, well, we have higher costs. It costs us more to deliver physician office visits in a hospital owned clinic. And we would be saying, well, if that is the less expensive, if that's a more expensive way of doing it, then maybe that's not the way we want to do it or have it to be considered part of the hospital if you have extra life safety codes and other things you're adhering to that don't really need to be done in a physician's office. That's where we stand. But I also want to say that we've never said site neutral for everything. There are certain things that are commonly done on an emergency basis and certainly the hospital should get more money for that than something else or if something tends to be done in the hospital and rarely done in a physician's office, we would say there's something systematically different about that that maybe can't be done consistently in the physician office for the same level of safety. So we wouldn't go site neutral on that, but the most basic one that we've pushed for site neutral and CMS is moving that way is certainly with physician office visits, just a basic evaluation and management visit. We shouldn't be paying dramatically different prices depending on the site of that care. Thank you for the comment. And Walter, please go ahead. Thanks, Owen. I am a patient. I don't have the expertise except from what I've gleaned in my 8, 9, 10 years at the board here and in other places. But when I was a patient I remember thinking that I was on an assembly line and they're turning number 8 screw passing it down to Joe or Mary or Susan or Jack to do another screw. One of the things that drives me into the sublimity of madness is that when you're a patient you don't know all of this but you're paying for it. It's through state taxes. It's through premiums. It's through $100 aspirins that they charge you. It's through all of the fees that you get. You know I mean I had inexplicable bills and then when you say hospitals can't control costs I immediately thought of the millions of dollars that these CEOs are walking away with that do absolutely nothing for our health care except buy a CEO a new yacht. You know the hospitals are sitting on billions of dollars in reserves. It's our money. That's what I thought as I listened to your presentation. You know go into a hospital do the waiting thing. We're paying billions of dollars now in Vermont and other states and we have these atrocious waiting times. You know to me hospitals I think state and federal governments all 50 of them not just here have reneged on their jobs in regulating hospitals. And it's one of the greatest tragedies of our hospital system that we treat it as a market power. You know and the patients are the ones who get screwed for that. That's what I thought is like those are my comments. Thank you Walter. Thanks Alan. Of course yeah. Member Walsh did you have something. Yeah just very very quickly. That one of the key things that I took away from your presentation Jeff was that rather than cost being out of control we've seen that there are many examples of hospitals that are able to control their costs. It's not exogenous. There are choices to be made. And there's room for improvement. And your paper from 2010 was the one that really brought that to light to me. So thanks again for coming. Great. So we're a little out of order. Jeff thank you very much for your time here. We're really generous and we appreciate it. We're gonna take up two general board items that we had that we pushed to the back end so we can make sure our folks who had to leave can. So first I'm gonna take up the board meeting minutes from March 15th 2023. Has everyone had a chance to review those? And if so is there a motion to approve? I move we approve. Second. Any board discussion? All those in favor. Aye. Aye. Aye. Aye. The motion carries and the minutes are approved and certainly not least on our agenda, Ms. Susan Barrett. Do you have an executive director's report? Well I have a very brief one. Just a reminder that we are accepting public comments on the FY24 hospital budget guidance. I think it was mentioned earlier. We've received several and in fact, we received one during this meeting from Sharon Guttwin and all of those are posted on our website. So if the public or others wanna comment on the draft guidance, we'd like to have those comments by March 27th. We must finalize the guidance by the end of this month. So in order for the board to consider those comments, we'd like them by the 27th. And that is all I have, but thank you for remembering me. Great, of course I could never forget. Is there any old business to come before the board? Any new business? And is there a motion to adjourn? So moved. Second. All those in favor? Aye. Aye. Aye. The motion carries and the meeting is adjourned. Thank you, have a nice day.