 Okay, it's eight o'clock. So we're going to get started because we're under a tight time schedule this morning and I'll start by wishing everyone a happy St. Patrick's Day and May the Best of your past days be the worst of your future ones Hopefully everybody will get to enjoy a green beer later tonight so We're going to start out by swearing in the team from our RMC and Claudio who is going to be speaking today for from our RMC? No, I may not have Claudio Claudio, are you there? Well, this could be problematic Judy are you there? doubly problem problematic Joe, you're gonna have to do all the talking. Oh This that would be a nightmare Kevin You might make the hearing go quicker probably would be Do you know if they're tied up with something right now or? I'm surprised that weren't here since they have provided me all the information their presentation the links so Audio shows up as being part of the meeting, but he just doesn't seem to be responding Kara, can you give them a call on their landline and see what's cooking? Are you there Kara? Yes, sorry Thanks Kevin, I know this this is Mike del Treco. I know we just finished a hospital leadership meeting. So that's Claudio might be just dialing at the moment Yeah, it's just that we're time-pressed this morning because they have another commitment at 10. So Will this have to get as much done as we can? While we're waiting Kevin, can I just ask a process question? It doesn't look like on the agenda were noticed for a vote So I wasn't sure if that what the expectation was around that today. I know that there's a tight statutory deadline So I think the The rule that we're operating under and I'll ask the legal team to for their advice on this but I think that the requirement that we had was for the staff to Do an analysis is make a recommendation to us within 15 days, which they did do So Bunker Russ, are you on? Hi, this is Russ. I'm on and and you're right. That's the 15 days is set in Guidance in the board's adjustment policy and then hi in that same guidance that says Our G our Judy and Claudio trying to get on the call. Okay That says the board will vote as soon as possible. Okay. Thank you Thank you. Just wanting to get the lay of the land Sorry, Russ. Can you just repeat the lessons that you said I was I couldn't quite hear with two people talking The guidance that we have for budget adjustments says the staff will produce a recommendation within 15 days of Proceed of the request and then the board will take it up as a vote as soon as possible thereafter Okay, great. Thank you So we do have time Robin Claudia are you with us? Good morning folks. Can you hear me? We can we thought maybe you were going to do a Ferris Bueller on your own hearing Well my apologies folks I have a little new technology and I thought I had it down, but I it's beyond my scope. So hopefully we can We'll get back to basics Judy Fox is She was going to be presenting with me in my office. She's going she's retreating to her office So she's logging on right now And we are ready to go my apologies for the delay and and you can see that Joe Krause I see is on the call our Our board chair has joined us this morning as well for this So We appreciate your absence. I had told Joe that he was going to have to do the presentation We came we came we came close mr. Chair So as soon as Judy gets on if she could just acknowledge that so that Kim can swear you both then I'm here. Okay, great. Kim if you could swear them in would you please raise your right hands? Do you swear the testimony you're about to give shall be the truth the whole truth and nothing but the truth so help you God I Do I do Thank you Okay, with that Claudio will jump right into it because I know that you're on a time schedule here this morning Yeah, so whenever you're ready. Take it away So we should be We do see the slides if there's any way you could put it into presentation mode. It would be great I'm gonna do that right now. All right. Let me let me do that right now. We have them anyway, so Can you see that now We can Yep Okay Okay, um my apologies again for the technology We have a few slides to walk through to support the filing that we made with you Judy's going to run through most of these a lot of them run through the financial impact and where we see ourselves Today and where we project we are going to be at the end of this fiscal year and Kind of walk you through the rationale for Where we feel we need to be with a interim rating crest request so Judy I will turn this over to you Sure. Good morning everyone. I think we just lost the slides Claudio. I'll show my screen Can you do that Judy for some reason? I am just having the worst morning. I got it. We're good Everyone see my screen? We can All right So I just wanted to anchor this morning's conversation in where we are projecting This is not new information to the staff or you as a green mountain care board This is the same information that we have been talking about and sent with our letter of intent So based on the first five months of the year, so this is through February of 2022 We are projecting a seven and a half million dollar loss And we'll we'll describe kind of how that loss came to be But it is primarily related to Salary and that just the workforce challenges that quite frankly all Vermont hospitals Are facing and so with that in mind The seven and a half million dollars if we look at the the drivers in terms of the deficit We do have to offset revenue with expenses and we have had a very busy first few months of the year And primarily the first quarter of the year Where we saw inpatient coveted Patients an average of about 16 a day We saw a Significant increase in lab testing relating to covet care Amounted to over a half a million dollars a month in variance And then a really strong ed where our ed volume was up over 16 percent Um in addition, uh, we did receive phase four funding From the federal government. We received about 6.5 million dollars We also received a set a second tranche of FEMA funding at about 750,000 So we do have additional revenue to offset our expense unfortunately With the inflationary issues related to both pharmaceutical supplies, but primarily workforce Not enough to overcome those inflationary Drivers so when we look at our staffing expense, we've got 35 million dollars of staffing expense that we're projecting through The end of the year With about a third of that in temporary staffing and we're gonna we're gonna spend some time there We have base rates and minimum wage. We did move our minimum wage up to $15 an hour And then we have incentive plans. Um, we have at the height of covet had over 200 vacant positions Half of which we would call direct patient care We had incentive plans in place to Really incentivize our staff to pick up extra shifts We had almost 70 000 hours of incentives That our staff Was um willing to to pick up and honestly, it's what kept our doors open and allowed us to keep services going On the non staffing side, what we're really seeing is that cost of pharmaceuticals We're seeing inflationary, uh, you know demands there you're going to see that in our modeling in our, uh, rate increase And we have continued covet expenses related to door access, you know facility control Um laboratory testing those types of things Overall, what we're seeing is if you compare our projected Staffing costs to our budget were over 25 or 27 percent. So Very difficult to overcome And looking at travelers in particularly, uh, we're we're challenged in travelers in two fronts We need more than we had projected in our budget We had projected we have about 20 travelers in our budget At last count we had 51 And so the demand for traveler, you know presents here at the hospital is is twofold And then the the cost of a traveler has gone up depending on what the skill set of that traveler is we're looking for Has gone up between 250 and 300 percent I can show you, you know, that bottom graph shows the individual rates We're an ed Nurse was coming in at about 70 dollars an hour pre-pandemic And is about 180 to 190 now At the impact of both that need for more travelers and the cost is really driving a significant increase in our Our cost and that cost is 16.8 million dollars That's total cost. We had budgeted about five million dollars of that And so you can see that 11 million dollar deficit really driving a significant portion of our loss When we look at the impacts of this comp plan, um, the inflationary pieces both in supplies and workforce We are seeing a significant increase in where, you know, we measure costs by expense per adjusted discharge We had been doing fairly well pre-pandemic. It was a focus of ours And then you can see the purple bar here is the first effects of kovid And certainly the orange bar is where we are today And we'll tell you that kovid has been much more challenging in the last five six months than it was in the first You know part of of the pandemic But what's really important to understand is that although our costs are going up It's not because we're inefficient and this is what the graph on the right hand side So this graph shows our productivity and it looks at our fte's per adjusted occupied beds So how many people do we have here on site all in including caregivers administrators clerical To take care of our patients and what you can see is that you know significant decline In what we call efficiency or productivity or increase in efficiency in productivity And this is really, you know A testament to our to our staff because even with this decline We kept doors open. We did not delay services. We did not You know shut shut down any services and it was because we had our staff here We had our incentive plans, you know, and we're able to Invest in it as well as our staff commit to taking care of you know the patients And so when we look at how did this come? It's driven by our vacant positions And so here you have a four-year look at vacancies and job postings here at the hospital beginning in september of 2019 You know where we had you know minimal Average I would say Postings a lot of you know just regular turnover To where we are today and in the height of you know september 21 we had over 200 job postings By the time we get to february 22. That's down to about 160 65 job openings Part of this is our ability to retain and attract In staff with our comp plan our minimum wage had a huge piece in trying to drive down This vacancy, but as you can see it's still very very significant and this Our end vacancy rate. That's what's driving our temporary staff And and so those costs are three times the amount that we would you know normally pay So despite these investments, we're still facing these workforce challenges We consider this to be our most significant challenge operationally Talk to you about how we've invested in dollars with our staff Certainly that has been A focus and a priority But we are also looking at ways in which we can partner in our community. We can foster relationships with educational institutions, whether that's you know at the high school level or You know at the college level and we've really stepped up our focus on how we can Attract a new talent to the hospital how we can Get students in the pipeline early working with staff or tech And then you know looking also at the old the the other end of the spectrum with Returning adult students and how we can attract them into our workforce primarily looking at our lna programs So we have really spent a good deal of time. We have committed to providing clinical expertise And faculty at both the vtc level and the castleton university level We've opened up our campus to allow for Classes to to be held here on site And we are trying to ensure that we can provide the number of clinical Hours and rotations here to really meet our demand Where we are today when we look at our new Grads who are expecting you know to graduate in in the spring here And another few weeks we have hired 21 new grads And those individuals will start throughout the summer months have a number of pieces that they still have to You know obtain before they can become a full aren here They've got to pass their NCLEX. They've got to pass an orientation period that orientation period depending on What type of Practice they're going into can be anywhere from, you know, four to five months to a year if you're an ICU nurse So I think just let me jump in for a minute the the takeaway here folks is We're not just sitting back and and looking for additional rate to solve this problem. That's uh the interim solution We have a whole host of these strategies as Judy said on workforce development The challenge is this doesn't uh, you know provide an immediate relief some of these investments take a little time Um, but some of these uh reconnecting with the pipeline and expanding the pipeline of nurses I know the legislature has been helpful In that, um, but that's one of the reasons why we need Some of this relief to let these investments take place We recognize none of the other Key areas we're focused on happens without workforce. Workforce is really job one So when we talk about quality and finance and patient satisfaction and employee satisfaction It all hinges on rebuilding our workforce. So we're we're making active strides on that And two additional programs just to highlight our nursing excellence program Has really reached out to the high school levels here and primarily with Rutland high school and offering internships to really get these students Kind of understanding what healthcare fields looks like what career options look like and providing a mentoring Opportunity so that's something we're really proud of and then our o r experience project Which is a joint project with vtc where we are trying to get o r nurses in the pipeline early We had eight traveling nurses within our o r and I think we're down to five now But certainly this is a pain point in a very very difficult recruit once you get nurses here There is a long orientation. So this is helpful in getting that onboarding really mitigating that timeframe and so Where, you know, we wanted to spend some time. I know That you've looked at our first quarter results. Our first quarter results Came in, you know, fairly strong in terms of the pandemic and the challenges we had with workforce But the first quarter is really not predicting where we're going to end the year And for a couple of reasons. So we did see that strong volume in the first quarter I will tell you that that has softened quite substantially across the house broadly We have seen our COVID testing, you know Go down to to almost non-existent. We were seeing, you know, a half a million dollars of revenue there Our COVID volume inpatient At the height of this last, you know, surge we had 24 25 patients a day And now we're running between two and three patients in house a day We have seen a softening in our ED utilization as well We also have, you know, over the two plus years of COVID we were able to Retain some federal funding and state funding We have exhausted all funds and we have been fairly aggressive and looking for funds coming in We have utilized the FEMA program, the state program, the federal program But now as of February we have recognized all of that income and so We're just on our own in terms of being able to support our cost structure What we do know is that rates alone are not going to solve our financial performance It is too difficult to put on a rate increase And so there's a very focused effort in this graph I think really illustrates that that we are very committed that as we see revenue go down We really need to match that with reductions and expenses And so you can see that orange line is really running kind of a parallel with Revenue in us really trying to make sure that we are flexible and can adjust to volume One of the biggest pieces of that is our incentive program as we begin to try to pull that back a little bit In terms of who's eligible and the the amount of incentive that we're providing Unfortunately because expenses are running above Revenue what we see is a you know a fairly drastic operating loss and Unfortunately going into the pandemic we were not exactly a high performer in terms of operating margin You can see that we were you know well within two million dollars a year If you were to take our projected loss and take the last five years of performance In aggregate in total we would have only generated 2.4 million dollars of net income very very difficult When you think about pension programs you have to support debt capacity That also comes into play there And looking at our balance sheet. This is one of the most problematic areas for me And and that's our days of cash on hand. And I know we've been touted that we have been a high performer We were at about 280 days That was somewhat inflated because of our Medicare advance So we came early to the Medicare program. We requested the advance We requested the full amount of advance. We received 25 million dollars that did sit in our balance sheet All of those funds were obligated to repay by september of this year That coupled with just the inflationary costs that are driving The average daily spend up has had a drastic impact in our operating margin Coupled with the fact that Rutland Regional Medical Center like many other health care organizations across The u.s. Have really used operating non operating investment income to subsidize the fact that it's really difficult to generate operating margins And you can see those performance metrics on the right with investment returns And has a a correlating impact on our days of cash really helping us maintain that As we see that volatility in the market as we face some of those market losses That it also has a direct impact on cash. So when we look at our 21 performance and look at that compared to our projected 22, that's a 25 percent decline in our days of cash And that is something that you know, we are Are concerned about it does limit our ability to reinvest It also has implications on our debt covenants. So We have always enjoyed a kind of a safe space if you will in terms of our bond covenants We have three bond covenants that we are held to by both the td bank and usda whom partner with us And with the projected losses this year We are really at risk in the debt service coverage ratio. This debt service coverage ratio is dependent on generating operating income And so it does force us into this risky area for 22 if we cannot mitigate this loss So we're here today to ask you To support us in in this We have really tried to be very open in our communication with you as obligated in our budget order We did notify you as soon as we understood that there was going to be a significant change in our budget So we did issue a letter in November in November Where we disclosed much of what we've talked about this morning We have increased volume covid funding But unfortunately the expenses have really outstripped our ability to kind of maintain even a break even We then knew we had a 90 day window to come to you So we've we sent our second letter our letter of intent on february 24th Where we were formally requesting a budget amendment that amendment is nine percent Right requesting an april first effective date What's important to note here is that We've talked about the staffing runs the 35 million dollars We're only asking for 7.4 million of that knowing that we had volume increases We had unanticipated covid funding And that this is not a year that we can build a bottom line And so this rate increase would still force us into a small operating deficit But honestly it's where we felt comfortable And then we have responded to a couple of different question sets from green mountain care board staff When we talk about rate increases It is becoming increasingly more difficult to try to balance a budget on rate increases. We have Too many competing issues We have a declining payer base who actually pays charges for us. That's about 28 percent of our volume And we're joining aco programs And so as our charges increase particularly for those commercial payers It does put us in a challenging position in aco target setting When we look at our payer rates and on average looking at modeling a rate increase For every dollar that we levy in a rate increase on the inpatient side We only collect about 16 cents the outpatient side a bit more competitive A bit more commercial 25 cents on the dollar And we've talked about you know market constraints. I will tell you we have Took the opportunity to look at our rates compared to other vermont hospitals. We all now have to publish our rates With the pricing transparency. So we were really trying to make sure that we were not out of line And modeled a rate increase that was More consistent with with other vermont hospitals So what we ended up with again is a nine percent rate increase. This is a targeted rate increase This is not across the board. This nine percent generates a little under 32 million dollars Of gross revenue where you see minimal impacts on the inpatient side 4.7 27 million on the outpatient side At that 32 million dollars generates about 7.4 million dollars of net income or Roughly 23 cents on the dollar We were very concerned about Driving patients away from primary care and supportive care services So as we looked at our rate increase, we were very Deliberate in looking at laboratory services Endoscopy services Those services that are diagnostic And are really a tool set for our primary care physicians So we did limit rate increases in some of those areas Areas we had opportunities are within pharmaceuticals. We've seen significant inflationary increases in pharmacy. We have not raised rates in in um Correlation or indirect response to some of those increases So we were able to look at the impact of rate increases and bring those into our pharmacy and supplied tiering structure And our last slide is just looking at our historical rate increase so We have enjoyed the the kind of position of being Historically lower than Vermont averages for a number of years We have had You know the ability to really Have great conversations with the green mountain care board and put together, you know A reasonable approach to our budgets Unfortunately, uh, those lower rates have really limited our ability to generate an operating margin And just going back to that slide where we look over the past five years our total operating margin is 2.4 With that it just does not allow us the ability to Take on these inflationary pieces and meet the workforce challenges without looking at higher rates So we did come to the difficult Conclusion and decision that we did need to go back to the rate payers and we did need to increase rates in order to react to these inflationary pressures With that said, you know, we still would be um, you know within The averages and medians of Vermont state hospitals So that's our that's our story. Um Happy to take questions Great. Thank you, Judy. And uh, I do think it's appropriate that we do the questions before we go to the staff presentation because you have that 10 o'clock hard stop I understand and Claudio if we're not finished with public comment and other things by 10 We'll finish that up, but we won't get into the discussion or decision-making phase until We can have you back with us so that you're not missing anything and that would likely be next Wednesday As we're trying to figure out everyone's schedules. I don't know how that would work for you But um, that's what I'm looking at. Maybe by some miracle we get done by 10 Um, I'm just not always that optimistic So hopefully that's okay with you Claudio. Yeah, we'll make that work Okay So I'll start out with a few questions just to kick things off and I just wanted to start out with a comment Judy on that slide if you could put it back up about the lower than average increases and and basically my comment here is that um And I don't mean this to be upsetting because I I want you to realize that the green mountain care board does acknowledge the tremendous pressures that are being faced by all hospitals Due to the workforce crunch and it's something that that Nobody had envisioned the uptick in cases Back last summer when we were discussing budgets and and if we had anticipated that then you would have asked for more And we gave you exactly what you asked for But on this particular chart Judy When I look back Five years ago, um, you had the the highest total cost of care per patient in the state And I really thought that you had been self-correcting and moving in the right direction by Coming in with lower than average increases over the last several years. So Yes, you to be commended for doing that But in some respects when you start out as one of the highest costs of care in the state It's still It's not something that I really would Congratulate you on um Claudio have you reached out to the carriers? We've heard in past mid-year um requests that um From carriers that they weren't going to um Uh rubber stamp a mid-year increase. I'm curious if you've had conversations with your payers to uh see if that uh Is in fact, uh Are they willing to acknowledge the unique circumstances that people are in? um We we have not done that kevin We didn't want to get ahead of ourselves in the process. We wanted to go You know, uh, the process was we present this to our board um Have the hospital board make a determination then second step is to the green mountain care board you are regulator Have you make a determination on where we're at and then we'll go to our payers? We have reviewed our payer contracts about um Looking at that, but we have not talked to them about this in advance of meeting with you Okay, there was one circumstance where we approved a mid-year increase for a hospital, but then um The carriers are making it clear to them that they weren't going to uh be looking favorably towards An increase in the next year's uh budget. So I just want to make sure that these conversations are occurring because um I'm assuming that uh You know, this isn't the end of what you're going to be asking for Maybe I shouldn't assume that you know what happens when I assume anything um You had some great slides and thank you for uh You know the the work that you're doing with the educational institutions And I was curious, um On the embedded Staff with faculty Are you paying um Their their salaries or is castleton? We are And are you paying at uh a rate that's above the castleton uh rate for their faculty so that people aren't being penalized for um Teaching the next generation of students Yeah, we're paying our our stand our given rate for these staff to support some of these extended teaching assignments Okay On the precepting end it it looks like you've opened up additional space, but of course the bottlenecks For future nurses when we look at uh what we're hearing 80 of the qualified students uh turned away from vermont tech 75 at uvm Because there just isn't uh the faculty or the precepting space to uh allow those programs to expand Have you maximized what you're able to do on the precepting end? Yeah, I think we're making good strides in expanding those I don't know if I'd say You know, I I think it's something we are focusing on. We'll see what type of um You know a lot of it depends upon where our budget falls out How much resources we can shift and allocate to some of these Areas, but I think there's more work that we can do and I think there's more opportunity I think we've made some uh really important strides um connecting with especially castleton um vermont technical colleges and and even down to stafford and uh To try to enhance the pipeline I think there's I think there's some more work we can do, but I think we've made a great first step The house uh has passed a bill out of committee that would allocate some dollars for faculty and precepting Do you know if castleton um has been uh I'm following that closely and if they intend to pursue some of those, uh Possible funding opportunities Uh, I I I don't know specifically kevin I imagine they are and we certainly are and when we see that legislation One of the things that we do know is that we have connected with castleton Our nursing leaders are meeting with their nursing leaders. Um, you know, we've had I've been you know met with uh their past and current uh interim president Um, and we're making great, uh progress with them In finding innovative and novel ways that we can expand uh slots for nurses. So, um I can't speak for them, but we're certainly following it very closely Okay, I'm gonna make them aware of it if they're not aware I was heartened to see um judy slide about, uh Getting the expenses under control if revenues start to uh to decrease And I'm just curious. Um How much a year are you spending on advertising and marketing? Um, I don't know off the top of my head It it is a um Fraction of You know, it's a Fraction of a percent probably it's probably not even a full percent of our annual revenues on this Um, one of the things that we have done Folks over the last two years If you want to call it advertising and marketing, um We've really done a lot of community Health information advertising we Purchased a lot of purchased ads in the local media um On cable To talk to our community to educate them on what is going on with kovat How they can protect themselves and to let them know what's happening at the hospital because You know, we made tremendous changes in visitation policies and mask requirements and testing So we spent a lot of money over the past two years on that And we we've also upped when we talk about advertising our help wanted advertising We've re we've revisited and refocused our um Whole recruitment and onboarding process to start with how we are advertising for staff So especially out in the social media space. That's where you know, all the action is today and placing ads for people who are You know, hopefully attracting more people to come to vermont and to especially to come to ruttland county To find work. So we've been we've been upping our spending in those areas What you don't see from ruttland regional is you don't see big ads in the paper for our orthopedic service Or so forth. Um, that's not the type of advertising we've been doing. It's been more around community health information And uh and help wanted advertising I appreciate that you're spending more for uh, you know, creating opportunities for people to learn about career opportunities because I do think that uh There are some great careers in healthcare that vermonters can take advantage of but um Just to give you the feedback, um When i'm out on the street what I hear the complaints about is I know that these are educational um full page ads that were in the paper But people wonder why the the paper wasn't uh working with you on a on a Better basis just to print that information as news rather than require full page ads And I'll tell you that I hear the the most complaints when people and this hasn't happened during the pandemic, but when people see a golf hole being um Uh sponsored by rrmc or go to a show at the paramount that's being sponsored by rrmc They just feel that it's inappropriate that um Rates are going up And yet these things are are being sponsored and they don't see it as a core health core care mission So i'm just giving you that feedback not saying I necessarily agree with it But just making sure that i'm passing it on to you so that you know as well Well, you know, there's the perception and then there's the reality We can get you the specifics what we spent on advertising and in what categories. I think the uh Golf uh tournament toll sponsors for the vna or for some other local health and social service agencies Are pretty nominal amounts for something that uh, you know, we're we're not sponsoring for-profit endeavors Things like the paramount theater and so forth. There is you know, our mission is to improve the health of our community And our direct mission isn't to improve the health economic health of our community But there is a correlation And you know our focus is in economic development, but there is some return on having some of those important not-for-profit Things to our ability, especially now with workforce to attract and retain Workforce and to to bring people to to ruttland. They need more than just the job to be able to come to and so Um, we're we're not spending a huge war chest on that We have spent a lot of money and we have taken out full page ads because With all the channels of information that people get Uh, a lot of this stuff that you know, just they're not going to read the the fine print in the news article They will respond to a full page ad and we've heard some things that that's been helpful in educating them on what they need to do to stay safe in the pandemic and not have to Contract COVID and get hospitalized so But point taken I know sometimes even the perception Makes your job harder and makes people think that We're not sticking to the knitting when it comes to reserves When do you think it's an appropriate time to uh dip into reserves? Um, I would say we're already dipping into reserves to pay for some things and um I will tell you two years ago when the bottom fell out and we didn't know where any relief funding was Um, we were fortunate to have those reserves because we uh, you know, we and we relied on them to keep our staff together And literally to keep the doors open of the hospital and not have to shut down things So, you know, what's the right level of reserves? Hard to say, but I think um What we will see is You know those things and you've seen it with some of their other hospitals in vermont That can change pretty quickly and when the stock market returns We're investing those prudently But when you know, we have such volatility in the market that can that can change very very quickly So we've started and as judy showed you we are already spending down some of those returns reserves paying back medicare And so forth, but I'm proud that we As of today, what's your total uh, uh dollar value of investments? That's a judy question Yeah, so, uh, we are somewhere in the neighborhood of 210,000 I'm sorry 210 million Scared me there for a second judy So, you know, we we do have Bond covenants, you know, so we we have to be careful of that as well 210 days are not all available per se And what's the margin in that in your bond covenants? Are you close to hitting that? That threshold or do you still have some space? Yeah, so it depends on what covenant we look at so days of cash, uh, we have a 90 day covenant Our Our pressure point is in the debt service coverage Ratio because that is really geared toward operating margin And available cash flow So in terms of spending reserves if you look at our Um operating margins over the last few years and you look at Our debt reserve payments our funding into our principal pension plan and Investment into into capital We need about six million dollars Of income not to go into either relying on investment return Or as as you put it dipping into reserves Thank you appreciate that If I could just if I may just add, um, you know, we are a Not-for-profit independent community hospital and two years ago when our board Revisited and did a strategic planning process. We looked at that and I think it's Never a one and done. I think it's constantly our organization management and governance and our board is always looking At what's going on in the environment? And are we stronger as an independent community hospital? Or would we be stronger and be able to accomplish our mission by joining? Forces and or coming on board with a larger system At that point in time and at this current point in time Our determination is that, uh, the best Way for us immediately to accomplish our mission is to be an independent community hospital And and with that there's no safety net And so we need to be prudent We need to invest wisely and and have some cushion For a rainy day and and I'll you know these This has been you know, we've had a rainy two years and Literally, um, I'm really proud of the work that we did And part of it was because we had we had some of those cushions that we could protect our community We could be here for the community during those dark days of the pandemic when we had 25 patients And it was just them. It was just a month ago last month That we were still You know our focus wasn't you know our focus was what if we have three critical care patients and there's only two beds And there's no room at the tertiary care facilities when there's no ambulance Paramedics to get them there. How do we what do we do? so I I mean I think You know, I don't want to get too dramatic, but You know, I think we need to have some of those reserves if if we're going to fulfill our mission as an independent hospital And make the investments and take the risks To fundamentally transform some of our cost structure and how we're delivering care In a value-based world where the board said we're an independent hospital, but they directed us To work more closely with our other health and social service agencies In our community to try to coordinate care better That's where they wanted us to partner more closely So just to give you a little more background color on the thinking behind that Don't don't take what I'm saying my questions as being an argument for Having less than reserves. I'm just asking you some proper questions and trying to pick your brain on What you think the appropriate level is and things like that and I probably shouldn't say this in a public forum, but as a Community member of Rutland. I'm I'm glad that you've made the decision to stay independent as Joe knows I've always believed that you shouldn't put all your eggs in one basket and when one of his previous employers was Being bought out. I was a critic of that and I do like to protect Rutland based entities. So That's just the hometown boy that can't stop itself from coming out So with that I'll ask my other board members For questions and comments and I'll go in alphabetical order starting with board member Jessica Holmes All right, great. Thank you Kevin Um, you know, I'm sure you all can appreciate the tough spot that we're in right trying to bounce patient affordability with hospital Solvency and I just want to say I appreciate the tough spot that you're in Uh, you know, these these pandemic days have been dark. It's exhausting Workforce pressures are, you know, daunting margins are declining. I I understand So I want to express my my empathy on the front that you're on and I'm hoping that you can understand Have empathy for the front that we're on um So a couple of questions around Non-operating revenues this year relative to budget Operating margin. I see you're projecting minus 2.5. What was your projection for total margin? Yeah, so that is the risk in this projection We are not projecting significant losses in our investment portfolio And so we are assuming that we will kind of tread water for the rest of the year So what does that exactly mean? Like what is your exact? I mean total margin estimate So we are we have assumed losses through February and we haven't assumed any greater losses from February through September in investments We've realized actual losses in the projection Okay Um, all right So Jessica did that answer your question or did you want to not really I don't feel like I have a number on what your total margin is Judy, do we have the projection for total? um With investment income for the end of the year So Excuse me. We have a four million dollar Six Four million dollar investment loss as of February We would append that to the seven and a half million dollar loss that we're projecting to come in at 11 12 million dollar loss for the year That's if we just break even on our investments for the rest of this year Okay Okay So in the in the Questions that you all answered. I guess this is March 11 You talk about This was your answer here if the rate increase is not approved We may be required to make difficult decisions to limit certain clinical services Unfortunately, the services that result in operational losses or services that are highly linked to primary care and are therefore services That would likely have broader utilization and cost implications So I guess I want to understand a little bit more about the process by which You would choose which services to cut and the criteria you would use if the board didn't grant the rate increase And then specifically i'm trying to understand here how much weight you would give to community need versus service line profitability and trying to figure out how you go forward If the board doesn't give you the full rate increase or doesn't give you the rate increase at all What how would you go about thinking about the limiting of clinical services? So um I think it would be a mix. I think we'd have to look at the economic impact of some of these services that are um, you know, we are subsidizing heavily And we would have to bring in our clinical leadership to help weigh out what is the um impact to patient care in our community Um, and there's no set methodology that we know of To do this, right? There's you know, this is something that's a little bit art and a little bit Science we can quantify the economic uh subsidy and loss Uh, and then we would work closely with our medical staff and our board And our other local health and social service agencies because some of those Have an impact we provide in our community most of the specialty care We don't provide any primary care But you know, we don't operate in a vacuum. So if we looked at things like um Some things that don't generate a lot of margin That could make it harder for our primary care partners to do their upfront prevention and management Um, and the reality in Rutland is We have the highest Medicaid percentage of any county in the state and the reality is for For us around this table for myself and judy and joe if we can't get a service at Rutland regional We can get over to dartmouth or to uvm or to other places down to boston Um, a significant part of our community cannot do that Um, so we have looked at when we've done our planning and strategic planning and we've Focused over the past two years. We've done a lot of focus on pandemic response, but we've also Started to try to get our arms around this and what we've determined is There's not a lot of services that we provide That wouldn't have a significant clinical impact if we stopped doing them They'd help our bottom lines significantly So I don't have a clear game plan for you to be honest with you jessica about that Um, we'd have to put in place a methodology and I want to be clear We're not trying to come and hold anyone hostage or be alarmist like hey If you don't give us this we're gonna cut this that is not what Contrary to some interpretation that is not what we are saying I think we'd have to go back We're hoping We laid out a a clear case and the fact that our rate increases have been Maybe overly conservative as you mentioned and some of you mentioned in our budget piece This is the time we've we've stepped up to the plate. This is the time that we You know, we need some some relief And I think you know, we'd have to go back with joe kraus and the board and ultimately the board will will make those determinations And put in place a methodology to say hey, what do we need to do to balance the budget and uh, Those are going to be very difficult and painful And painful decisions because there's There's not a lot of stuff we're doing that doesn't have a significant impact On people that we just can't do and we've and as you've seen over the past several years when we presented our budget um, we've done some things on administrative and overhead to try to Reduce that those areas and and I don't think there's a lot of room there. So I don't know if I fully answered your question, but that's that's our thinking. I mean you did To be honest with you This is something that I've been testifying in both the house and the senate about in the last couple of weeks About how and and you know your presentation said it rate increases are increasingly becoming more in effect Um, and the reality is that we're not on a sustainable path Rutland is not alone in this um, and to the degree that we don't start to Think about different payment models and looking at the entire system and trying to find efficiencies across the entire hospital system Uh, the reality is that hospitals are going to become More and more likely to have to cut essential services and I'm part of my curiosity was how are you thinking about cutting those services because it's a very challenging and difficult decision to make and I Um, you know, I'd hate to think that it's all based on service line profitability because we know that You know the services that are least profitable are those that are I know Rutland doesn't have primary care But they tend to be primary care. They tend to be mental health. They tend to be those types of services And that would be detrimental It there are a lot of cut those Yeah, there are a lot of services that we provide although. It's not primary care. Um, there's a lot of You know, when you really look and distill it down, uh, the economics of health care, which you know very well There's a small group of things that subsidize a big group of essential services. Absolutely. I know And yeah, you know 12 years ago in the middle of the opiate crisis when there was no medicated assisted treatment program in Rutland county And project vision and Joe remembers this very clearly because he was the prime mover And chair of project formative chair of project vision up until last year Um, that was one of their early findings and Rutland stepped up to the plate I don't take any, you know, my predecessors were very And they put in place a medicated assisted treatment program for people suffering from substance use disorder It made a huge impact in this community Wide ranging impact and as a matter of fact, I would say it's hard to quantify it But west ridge had a economic return that we don't see every day Um, and it just gets kind of blended in but you know treating people allowing them to To hold down jobs and be present for their family It it's made a huge return and and our former chief baker told me when I came to this community that Claudia when when when Rutland when I met him. He said Claudia when Rutland opened that property crimes went down By 25 percent or something, you know, something along those lines So so there are some of there's one example of something we're doing that has ripple effects And I don't think we've seen it yet and I think there's going to be a lot of studies out there That see we now see what's happened when we've had to shut down essential services during this pandemic in an unprecedented way And I'm hearing anecdotally, you know, when we don't do Routine colonoscopy screening I'm hearing from our emergency department providers that anecdotally they're seeing more cancers, you know, two years later than they've Recall seeing so I think we're going to see some studies and some some of the longer term impact That might not be very clear on Judy's balance sheet and an income statement and projection She's saying but get kind of mixed into the cost of care In a community like like this You know that that's really, you know post industrial and challenged and and so forth. So so I like to add just another thought to that because We can't think just about the bottom line 30% of our volume is in the aco and if we are going to Reduce services that are going to impact our patients access to care It's it's going to be at risk in the aco if if they're not receiving treatment delayed care or going somewhere else and so You know, we really are thinking very holistically about these issues on both sides because we we have competing and conflicting strategies with You know part of our service being fee for service this being Fixed so it does it does provide for some interesting contrasts and Have to think about things a bit differently Let me just ask another question around, you know, as you as I mentioned and you mentioned, you know The rate increases on commercial side are going to become more and more ineffective Have you reached out to diva to request Increases on the medicaid side since clearly that's one of the contributing factors to the shrinking operating margin Especially given the payor mix of ruttland regional What efforts have you made to reach out to diva to try and get some support? We have not reached out to diva to ask for a rate increase from them Why just out of curiosity Well, and again A significant part of our medicaid volume comes through the acl I I I don't know. I think it's We don't set a payment policy and and and and payment and You know, we reach out to diva when there's a deviation from their established policy, but I just never you know, we can apply to diva to say hey, we need a rate increase I don't know of any Well, I think the degree that that diva and medicaid have to increase the understanding of the impact of not having their rates and their reimbursements keep pace with inflation I mean, we're never gonna the the cost shift is going to continue to increase if we don't If hospitals don't continually also express the concern about those reimbursement rates not keeping pace with inflation So so so we haven't reached out to diva, you know, they're the administrator They they follow the the guidance and the policy that's been set. What we have done Member Holmes is that we have talked with our legislator legislators quite extensively, especially over this past year and matter of fact I got off a meeting this morning talking with some of them with some of the hospital associations talking to them about those concerns So, you know, we've we've tried to go to the legislature to Let them know what's happening on the front lines and hospitals, but we haven't talked to uh to diva specifically Well, I'll just share that, you know part of one of our recommendations out of the sustainability plan That we sent to the legislature that we've talked to the legislature about is is recommending that medicaid Keep pace with inflation. Um because we recognize that this is a concern um I guess my last Question if you could talk a little bit about or actually maybe I'm thinking it might just be better in the interest of time if you could share um, some of the the analysis that you did on How you decided to to apply the requested rating crease to the certain services I was a little bit confused Judy. Um on the slide that you Had you've listed clinical services and pharmaceuticals and laboratory and I understand You're trying to balance, uh, you know, not increasing the cost of services that are ancillary to Primary care, but I did see lab services on there and diagnostic on there and then I also saw pharmaceuticals I wasn't really sure you're saying you're increasing it on pharmaceutical But trying to avoid things like endoscopy and and some of the you know labs that would be supportive of primary care So I wasn't really sure which services you were increasing and I also, uh, you know, you talked about using the hospital transparency data to look at your market position in those, uh In particular services that you have chosen to increase the rates I'm wondering if you'd be willing to share that analysis so we could see Where the rate increase would be applied to and where the other hospitals are within those, uh, you know where you'll fit Within the distribution of rates after the rate increase on the rates that you're choosing to apply the rate request to Yeah, we have a question make sense Yeah, Judy has a more detailed schedule that she could she could get to you You know what what Judy and her team did was look at Those areas that we were under the median for other PPS hospitals and in our service area in our region and then Um And and then we applied a little bit of uh thought so lab services is one of those things, you know Those are The bread and butter day-to-day tools that our primary care docs have To keep people healthy and identify when they start getting out of whack, right? So and that is one of the things that we hear from our Our physicians that hey, you know, I'm flying blind When I ask my patient or I ordered a lab for my patient and they don't get it because they say they can't afford it And that they don't really have the tools they need to do their job So there's an altruistic thing. We recognize that and we've kept our lab charges are significantly Below that's one area that we are below. We applied a little bit of rate increase to there because there's some room But we don't want to make it harder to to to take care of people and do the primary care up front prevention and I recognize that. Yeah, and the other thing I think to balance is where are the services where the copays and the deductibles are particularly high and how does this You know How do these rate increases apply to the out-of-pocket costs that consumers in your area patients in your area are going to face You know, so again, it's I See the challenge that you have how do you balance community need the copays and the deductibles With needed margin and how do you look at where to apply those rates? So I'm just a little bit more, you know, curious about what it what it boiled down to for all of you In your analysis Judy, do you have anything to add to that? Yes, it's we certainly can share. It's a very detailed analysis at the service level Just to tie back a bit on the laboratory pricing One of the reasons why we've been able to keep our rate increases low in prior years is we actually Reduced lab prices and it took us about four years to get there So if you model our lab prices against other Vermont hospitals, we are significantly, you know, lower So we did take an opportunity there, but only, you know, a minimal opportunity But certainly we can share That is one of the benefits of pricing transparency is you can look to see where you are in the market You know and payer mix hasn't has a, you know An application there as well Which is why you see most of the rate increase on the outpatient side With 70 of our inpatient volume being state and federal payers You just don't generate Net revenue there Great. My last and final question is have you invited staff members to contribute ideas for cost savings? Just in terms of a staff survey that's gone out or any kind of like open box or something like that many organizations I think find Innovative ideas come from those who are literally in the weeds and maybe seeing things that might be opportunities for cost savings I'm just curious if you've reached out and done some sort of staff survey to solicit ideas We we have not because Up until really the past month to be honest with you If we haven't been looking at cost we've been looking at filling shifts How do we make sure that we have the staff so that we didn't have to go back to the well and shut down in Endoscopy so that we didn't have to that we could take those inpatient psychiatric patients. It was it was really So we have not Pivoted that quickly to that because Literally we were calling staff Every day We were looking at the beds that we had available three times a day Meeting every day planning out whether we needed to cancel a surgery Uh that for the next morning Because we wouldn't have the bed availability or you know, what what came out is we had beds But we didn't have some of the staffing and so we We've really spent our time Literally up until last month on focusing on that But we are pivoting quickly and those are good ideas that we will um and we've started this already by as you can see our cost of have Crested and going our costs are going down from that slide Judy did and we were pulling back We're ratcheting down some of the incentive programs Um and those are really hard decisions But we will get to that where we'll I you know We'll talk to our staff, but we'll also ask our managers our frontline managers where they see these opportunities But I gotta tell you that's a big that's a big pivot I just the operate the reality of what we've been doing You know, wait a second last month. We're just get as many staff as you can and now all of a sudden it's like Okay cut costs That's just the position that we're in and You know, Judy and I think about this all the time And our board is you know, certainly aware of this But the frontline managers were really you know They haven't had a chance to take a breath and all of a sudden we're going to be pivoting and be like It's all about cost now. Yeah I appreciate it. I appreciate the struggle. Trust me. I understand. Yeah, but no, no, we will we will You know, that's where we're gonna have to that's part of our coming out of this thing Rebuild workforce look for areas we can Address the financial impact that we're gonna see over the next couple of years and going forward Yeah Well, it's a tough time. I appreciate all the thought that's gone into this I know it's not an easy ask That's it for me. Jones. We're gonna turn to our next board member board member robin launch robin Thank you The benefit of being third Is that I don't actually have a lot of questions. Most of my questions have been already asked and answered um I do also want to echo Kevin and Jess's um Empathy towards your staff. We do realize The front line staff as well as all of you have just been straight out and so it's It but it is helpful to hear about how that's impacting um the hospital in these hearings because I think We can understand but certainly hearing about it is very impactful um My question That I have left is related to the pair mix on um Slide 14 um I was noticing that your self pay is very small at 1% And that there's a significant or fairly it's still small but a larger portion of 11% that includes all other and I'm wondering if you could just give us a little bit more description of what's in The all other I would assume for example Uh, maybe medicare advantage might be in there, but could you speak a little bit to that? Sure. That's exactly what it is. It's any other insurer. That's not medicare medicaid Blue cross or self pay. Um, so UHC at nesting signa mvp workers comp all of those Roll up into that category Would try care be in there as well? Yes Thanks. Sorry Rob. No, that's okay. No, that's a great great follow-up. Um All right. Well, that was really the only question I had left that you've already answered my questions I had questions about reserves and I'm glad we'll be getting the analysis that you will share about the targeted to the rate increase because that was an area of interest for me as well And Thanks very much for coming in Thank you robin next we're going to turn to board member tom pelham tom You're muted tom Sorry, um, I get the advantage of going forth and most most questions have been asked I'd like to spend a little bit of time kind of focusing on the uh the kind of payer mix of So kind so looking at looking at your your projected 2022 budget relative to your Approved fiscal 2022 budget. Um, there is a 36.9 by million or so million dollar increase in total operating revenues against a 44.6 million dollar increase in total operating expenses Relative to the operating revenues About 7.4 million of that or exactly 7.4 million of that, you know is from the the covid funding leaving 28.7 million coming out of net patient service revenue and i'm wondering if the payer mix of that marginal increase in net payer revenue Is substantially different from Kind of the underlying payer mix for the total budget that you submitted and that we approved Sure So the short answer is no it's not we've seen a fairly stable payer mix I will tell you the one change that is really directly related to covid Is that any patient who is seeking care here at the hospital with a covid diagnosis a covid admission? Um lab test If there is a balance on their bill that that balance is written off And so regardless of what type of insurance they carry we do not balance bill for covid That is related to our ability to Be eligible for some federal funding So that did have an impact and our payer mix but not in the traditional sense in terms of who's enrolled in what program So this is probably a question that definitely will get answered in our 2023 budget process, but just as possibly a preliminary kind of looking at the increases In operating expenses and operating revenues that are built into this 2022 budget Is uh, do you have any sense about how much of those increases might be one time? You know both on the revenue side and on the expenditure side So that you know We had or you have or we have some sense of whether or not there's a soft landing down the road or is Are these increases going to get baked in? and both on the operating side and the revenue side and And and and they are that they aren't some of them aren't one time in nature Sure. So we're grappling with that as we speak The senior leadership team met yesterday Looking at inpatient utilization and and understanding where that landing is Coming from a five month, uh, you know utilization pattern where we saw 15 to 16 Covid patients a day and so We do believe that utilization will come down We do believe you'll see a softening of utilization in our 23 budget Expenses will also come down. I think you know a simple Example is in our specimen collection center where we Perform all of our covid testing We had to amp up Staff there significantly. You'll see a significant decline In that patient or in that employee base coming into our 23 budget Places that we're having some difficulty Is around facility access workplace violence? Those pieces have certainly and sure you saw the article in in in the herald a couple of weeks ago But that has to be top of mind for us and we cannot skimp on staffing At the cost of not keeping our employees safe. And so we are looking at some of those costs related to Patient and employee safety in our in our 23 budget My final question follows up on a little bit one that just asked Or profile having to do with the payer mix So what I understand is that the payer mix of of of the revenue increases that you've experienced You know, it's pretty much similar to what you Expected or what the profile is of the underlying payer mix Which says to me that part of Of what we're dealing with here are A rep a revenue source that doesn't cover its costs And and so we're in this classic position now of looking down the road to the commercial payers to to pick up the tab You know, I think it's true for you that you don't have the freedom Independently as a hospital to go to diva and say can you help us out? Can we adjust some uh because those are statewide rates that are set Every hospital fit pretty much as I understand it faces the same kind of rate structure across the state and so my And and I you know, I for for my own account. I've kind of taken a look You know at the vote of the emergency board having to do with the 2023 Medicaid Appropriations and it looks to me like they're baking in another cost shift for 2023 um, I you know that that needs to be tested, but it's something that The emergency board is the official embodiment of of the look down the road for for Medicaid statewide and I would just urge you to um with vahs to be to to make this payer mix issue and cost shift issue of a fundamental um, uh and aggressive um Issue because it is structural um and income and I think we've heard today that bit by bit this cost shift has put us in a position where we can't really go to the commercial folks anymore It's gone too far and uh that argument I think needs to be made to the powers that be and You know, and I think as a board member. We've got to think about ways that we can You know highlight it um maybe even baking in some assumptions about Medicaid increases that may or may not be real but at least uh, you know putting the pressure on the powers that be to um Pay their fair share of the costs of operating our health care system So, um, I understand you can't call diva up and say help us out. That just is a is a dead end and uh It's got to be done on a collective basis So those are my thoughts and questions and uh, I'll pass it along to the other time Thank you time and before we go to the other time I just want to say judy from your your lips to god's ears I was knocking on wood when you said that you'd be able to ramp down the testing uh in this coming year I I wish I shared your uh total optimism that we were putting a lot of this behind us Board member walsh tom Thank you chair and hello claudio and judy judy. It's nice to meet you um I just want to echo a couple things I want to express my appreciation of the effort you put in and the time You're taking to be here with us today um, and it and express um Empathy toward the exhaustion that you all must be feeling along with your staff um I want to Appreciate the efforts that you showed in the presentation um efforts to rebuild the workforce right the retention and incentives um, I appreciate the targeting of the increases that you're asking for and I want to echo Jess's Request for more information about how that will be decided upon um presentation outlined a worrisome situation for for sure The auditing report that you sent is part of part of this Showed a good deal of reserves and I appreciate the explanation that you gave about starting to dip into those Uh, the reserve in the auditing report was over 200 million dollars And I know that it's not always appropriate to compare family budgets to hospital budgets that can be misleading But few of us have a proportional amount of reserve and we build our reserves because we may need it to pay for health care Um, and so the questions of how much reserve is appropriate and when do you use it? I know there's not a scientific place to look to see that But I think it's important to remember that the idea that service lines may close Because the hospital can't afford to keep them open We as a board need to balance that with the fact that The alternative is that people could be priced out And they lose out on health care that way So that's the situation that we find ourselves in after an exhaustive Uh pandemic and I appreciate your effort and I appreciate you being here today Back to you chair Thank you, tom At this point we'll move to the health care advocate sam. Are you asking the questions or is someone else? Good morning, chairman. I actually don't have any questions at the moment, but I'm not sure if Eric does And apologies. I still have my voice is very lost a little bit sick at the moment Eric do you have questions? He said he does not Okay, are we having uh communications problems again today with Eric? I'm not sure, but okay. Yeah, we're in close contact. Well then, um Move to uh the staff, uh analysis and uh a whole public comment till the end Patrick Right. Can you hear me mr. Chair? I can thank you patrick And kim can you hear me loud and clear? I can thank you Very good. Okay. Thank you everyone. Good morning. Thank you to the folks for Rutland for the Communication over the last couple of weeks and the presentation this morning So the staff is reviewed Uh a lot of the all of the documents that Rutland has sent over but before we kick off here I'm going to turn it over to our staff attorney rustman kraken to review some of the Items that the board shall take into consideration in the following factors. So rust will turn it over to you Hey, thank you patrick I want to highlight here from the board's rule uh three 401 These are some factors that the board takes into consideration in reviewing a budget Either independently or as is the case here when the hospital requests an adjustment to their established budget um A lot of these factors were covered by Rutland and its presentation and and the questions You'll find them also touched on in the slides here The variability of revenue. You'll see an income statements in slide five and six of the staff presentation The ability of Rutland to limit services to meet its budget Was discussed and you'll also see it summarized here in slide 11 Uh the financial position of the hospital relative to the overall system You'll see some comparison metrics in uh slide 10 of the staff presentation Um performance for the prior three years is summarized in slide seven and eight And the last one is a broad catch all for other considerations deemed appropriate by the board um, so wanted to highlight these as uh factors to for the board to consider in making its its um A decision on the request and with that i'll turn it back to you patrick Thank you russ. Uh, so that was the framework by which we uh Built out our uh review here and recommendation So as you've heard uh kind of a recall here This has been in motion for some time with an initial letter coming from Rutland back in november But then their executive finance committee approving Their request internally in mid february and then the letter was submitted to us in late february The reason for the request just to recap here unanticipated demand for services and workforce challenges and recruiting recruiting and maintaining staff These challenges are having the adverse effect on operating expenses that are projecting to exceed the budget by you know the 45 million dollars The margin erosion Is projected due to the factors cited above uh financial update relating to The current state of things The increased demand is generated projected gross and net patient revenues that are exceeding the approved budget by nine and 10 8% respectively Other operating revenues are 37 percent over budget. We heard Rutland talk about some of the federal relief That they've received that was unbudgeted When they're when they came before the board late last summer operating expenses Are driving the increase part of the driven by increased demand workforce pressures and rising costs and these are projected at 15.3 Percent over budget and the result of that operating margin is currently being projected at A loss of 755,000 a negative 2.3 percent operating margin And almost 7.7 million dollar variance from what was essentially a break-even budget so just recapping some of the Financial updates as it relates to the budget that was approved by the green mountain care board back in september The request is a nine percent Chain and charge rate to gross charges for specific services from the 3.6 before that 3.64 excuse me that was approved in september of 2021 And Rutland has requested That this new rate would be effective in april 1st So essentially they would operate with six months at their Initial approved rate and six months at the requested rate. Should it be approved? And you can see here some of the impact of the projection With and without this request So essentially it's adding about 7.4 million dollars from the current projection The financial impact as well the total gross revenue due to the impact the rate only is an increase of about 31.8 million And this essentially equates to 7.4 million dollar impact in mpr And we rounded up so our numbers will be slightly different than what Rutland projected So we have essentially the 1 percent value is roughly equal to 822 thousand dollars If approved this would make gross and net patient and fixed prospective payment revenues projecting to exceed budget by 14 and 13 and a half percent If if approved no change is projected in operating expenses That would still be running essentially at 15.3 percent over budget And if approved the operating margin situation improves dramatically with the loss of 187 thousand dollars Which would be a difference of almost 309 thousand dollars from their approved budget Here are some of the figures just to highlight some of those Financial updates and impacts that we've shown we took some of their first quarter information as judy mentioned They had submitted that that to us. So as of december the hospital had a net operating loss of Just over one million dollars and you can see here We've also built in the current projection that they provided us and the projection with the rate increase to kind of Tie together the different perspectives as the situation has evolved for Rutland On the next slide very similar look also applying some variances on the far right To provide some perspective here And you can see the variances that I just spoke to specifically around net operating Income and the changes from budget that would result and also the changes With gross revenue and net fixed net patient revenue and fixed prospective payments Still even with the rate increase Rutland would be exceeding budget in a significant way and as we discussed last week at our fiscal year interview Budgeting in this current environment is very difficult. And so we are seeing some extremely large variances occurring in that space But we can see here too some of the operating margin and total margin percentages that are the result of some of these projections So we thought it was important to provide a history here and some context Rutland regional from an npr and fpp perspective looking back over the last several years has Pretty much operated in the range the mid 200 million dollar range And to really highlight Some of the growth that they were talking about you can see this is a hospital that is currently Moving very rapidly towards the 300 million dollar threshold, which having operated in that mid 200 space for several consecutive years really highlights The growth that they are Experiencing and the demand for their services And so we wanted to provide some context in that regard to show that This is very very real For this organization and it's uh, it's definitely out of the ordinary One Rutland operated in that mid 200 range between 240 to 256 million dollars and now we're seeing some pretty sizable Year-over-year increases in the experience that they're having and for their services Building a similar look but with the projected projection and rate increase again This would put the hospital over the 300 million dollar threshold Which stands in stark contrast to where they've operated traditionally And of course what that also means is that this revenue is not completely free and clear There are operating expenses that are are following those the revenue growth paths So the hospital is traditionally operated At levels much much lower from an operating Expense perspective and now they're having to wrestle with the growing costs that are outstripping their capacity to generate revenue And as judy and claudio Exhibited they've for the most part been operating with some pretty thin margins And also Some pretty low Rate increases over the last couple of years now. We know that those are not Tied one for one to each other But if we strip out fiscal year 2021 that we have here knowing what we know based on the discussion that we had just last week That that is predominantly positive margin due to Provider relief funding that from a true operating perspective This hospital has been making due with some pretty slim margins and relying heavily on its capacity to Adjust their business model As the situation Requires so they've been profitable Probably not as profitable as they'd like to be but they have not Produced any losses in that respect and and the capacity for leadership to maintain Narrow margins is a pretty big challenge And probably not one that we can measure in the work that we do here So there there needs to be a recognition of that capacity as well So that tells us on the finance side That the situation that they've brought to us as it relates to workforce challenges and rising costs means that Even with their experience capacity to manage to some narrow margins. It has gotten to a point where It is very difficult for them to do that without some needed flexibility in that financial space We had the conversation already about some of the reserves and to judy's point Yes, there is a certain amount of padding that has gone on in days cash on hand as we've acknowledged through several series of discussions over the last couple of years due to advances and provide a refunding and how hospitals treat that However, it's important to understand too that Reserves are usually Much more easily Used up than they are replaced and when you look at some of the margins that Rutland is producing here in this environment They would likely Bring their reserves down should they begin to dip into them at a much faster rate than they could replace them And so when you get into that space That level of what is an acceptable amount of reserves can be whittled away very very quickly So we need to be cognizant of that fact as well and we have to remember If those reserves are in investments. Yes, they are susceptible to Stock market forces But as they're whittled down and the principal balance of that is reduced the capacity for those investment balances to spin off income that can be used to backfill some operational Setbacks becomes less and less And so it can be a slippery slope when we get into that space of what's acceptable And should they depend on their reserves at this time? So just want to be completely upfront and objective about that space But for the most part Rutland's age of plant is is Pretty much in the median space may be a little older than most of the hospitals in vermont But again without the capacity to produce Meaningful margin that inhibits their capacity to Invest in some of their assets and asset replacement and what have you and then if that is not able to be done through operating margin They have to go into their reserve space to be able to do that because there are Returns that can be made from improving your asset position and replacing assets So it's none of it happens in a vacuum It is all tied together And when you find yourself in a position where Rutland is at it can become A little precarious to balance that out and it is an immense challenge as we've heard this morning So looking at the rate history here The original five-year rate as it would stand as of the approvals for fiscal year 22 budget and then What it would be should the nine percent Be approved by the board here now I want to put some context to this because this is a look that we've provided Over the last couple of years in the lower right hand corner And you can see here by some of our numbers on the average median that Rutland is about middle of the pack However, that is uh, that is heavily influenced by the information on the left-hand side of the screen that in 2017 They actually had a negative five point one percent Reduction to rate And that fell off and so the weight there of a relatively small increase of three point six four carries with it With that backfill five years a little bit more Significance than it otherwise would and when we looked at our presentation from last budget cycle Rutland was higher up on this scale here, which means their five-year average and median were much much lower So the five-year look is great to grab some context, but it's not a perfect look is what i'm saying here So we can see In the upper right hand corner that if approved the combined weighted increase that is six months at Three point six four and six months at the proposed nine percent would put Rutland at about eight point one four percent for fiscal year 22 once it's completed and of course that would boost their five-year average and five-year median Significantly as it relates to their peers within the state So you've heard that Rutland responded to some of our questions. We thank them for that They were very prompt in doing so an attentive But some of the questions we had and we've talked about some of these so far about Confirming your request is able to be implemented under third-party pay or contract They did acknowledge in their letter to us And their response to us that that had not been done as of their february 25th 2022 letter to us and also Mr. Fort had acknowledged that as of this morning and their logic as to why We asked What is Rutland's contingency plan if not approved? And what is your ability to limit services to meet your budget consistent with its obligations to provide appropriate care? We've we've heard some of that too. So we filled in some of the responses that we received from Rutland one of the most concerning financially would be that they do trigger a debt covenant It's likely that and I'm not going to speak out of turn but in my experience working in the commercial space that An operator such as Rutland it likely would not result in a calling of the loan as in calling in the debt There's probably some other mitigating factors, but certainly Once a lending institution Recognizes a debt covenant covenant violation Things can change Significantly that is often seen as lenders as kind of an early warning sign that they need to begin to pay more attention to the borrower So just want a level set in that space that that is a a significant concern for both The borrower being Rutland and any and their lenders which they described to us Rutland does believe that their services are in alignment with their community's needs And without the rate increase Rutland may have to limit services as was discussed earlier Um We understand also along with the discussion here that rate is certainly Not everything and we would expect based on the past history of Rutland's ability to manage their services that they would make every attempt to Right size is necessary without having to limit those services And lastly um Rutland's mid-year rate request having impact on wait times issues We wanted to make sure that uh, there wasn't going to be Any significant impact there Rutland said no, this was not going to be the case This request was entirely due to the need to respond to inflationary costs really largely to workforce So that all said our recommendation here Is that Rutland has demonstrated to us that uh, this nine percent is necessary And so we recommend that they approve the nine percent Requested increase to mitigate projected margin erosion and provide the hospital leadership the financial flexibility to meet the unforeseen Circumstances resulting from increased volumes workforce and other cost pressures The approval of nine percent would create an overall rate change of 8.14 percent from 2021 for Rutland regional because we are in fiscal year 2022 so wrapping up our Recommendation is based on the fact as I said that the pressures that this particular hospital Is facing could not have been foreseen back in August or september they've shown a demonstrated capacity to operate that hospital To meet the needs not only of their community, but also to maintain a stable financial position in an environment that has become increasingly unstable But the time has come for them to be provided a little bit of financial flexibility to meet The vulnerability volatility excuse me that is being exhibited in that space currently And so as we've done in the past here, we do have some suggested motion language for the board to help ease Any motion that a board member would like to make in advance of a vote So with that mr. Chair, I will turn it back over to you Thanks, Patrick, and I know that we're limited on the amount of time that we have the folks from Rutland. So I would ask if you and staff could Just forward to the board your calculations on how you came to the 8.14 percent Are there questions or comments from board members for staff? I actually just have two quick ones Kevin if I may you may Okay, one was Patrick if you could just work with judy on slides five and six On the projected total margin It sounds like there's an additional four million dollar loss from investment income that would If I understand it would increase the total margin loss. So they wouldn't be the same If that's correct judy am I am I interpreting this right? So I'm you yes, I can work on that Okay, that would be fantastic. It would just be helpful to know what the projected total margin is And then my other comment Patrick is just on slide 10 Where we do the change in charge Comparison across hospitals This is a slide, you know that we've seen before and that we've used before but I guess my request would be Given the way that the uvm health network does their effective commercial rate versus their change in charge My request would be if we could have both up there side by side where we actually factor in what the effective commercial rate Request was from those three hospitals Simply because for example, the asterisks their p.m. C has been zero since 2017 That that doesn't actually jive with what the effective commercial rate requests Were over that time period for example in 2017 It was 5.3 percent was p.m. C's effective commercial rate request So I just think it's it would be helpful to see both I recognize this is accurate because their change in charge request is different than their effective commercial rate request But if we're really trying to do a comparison and I again recognize it's still not apples to apples, but it would be helpful So small request Um going forward, but thank you very much. I appreciate it Certainly we can do that. We specifically left that out Because we wanted the focus to be on rottland only but we can certainly do that Thank you. I appreciate it. Okay other questions or comments from the board I have a quick one so I obviously uh If we were to approve a change in charge increase that will have an impact on the mpr budgeted for This year and the the request that I would have is for staff To think about whether we should also be Approving if we do approve a change in charge would we also approve a change in the mpr? Otherwise It it seems like the historical comparisons get a little tricky So if staff could think about that that would be helpful I mean just so i'm clear. Are you referring only to ruttland or for the system as a whole? Well only to ruttland right now right because that's the request we have In front of us obviously it will impact the System as a whole comparisons, but just having that information for ruttland would be helpful right now Okay, other questions or comments from the board Hearing none. I'm going to open it up for public comment at this time Does any member of the public wish to comment on the request by ruttland regional medical center and I am going to call on sara teach out first Thank you. Sarah teach out representing blue cross and blue shield of vermont Chair mullen and members of the green mountain care board during your consideration of the ruttland regional medical center's mid-year Budget request potential other mid-year asks and the upcoming annual hospital budgets you will consider this summer Please remember the vermonters who are paying these staggering bills The voices from the rate review public hearing were clear and their stories were consistent in their message Vermonters are outraged and asking why their costs are increasing year over year As members of the green mountain care board you must draw a very clear line between the hospital budget increases You are considering today and the out-of-pocket costs for patients Claims cost for employers and premium increases that will follow this decision A fundamental basis of the all-payer model agreement is that the cost increases must be kept below 3.5 percent We make every attempt to do this on behalf of our members in our annual contract negotiations While at the same time balancing access challenges that are playing playing out right now in a very painful way for vermonters The green mountain care board accepted ruttland regional's original 3.64 budget request But a nine percent increase now that will result in an 8.14 percent Increase over the 12 month period is a significantly different story Just last week your staff provided an eye-opening snapshot of the 2021 hospital financial results that demonstrated a very strong year for 13 of our hospitals Rutland regional had its strongest operating margin in five years coming in 2.8 million dollars better than its next closest year in 2017 At the end of f y 2021 they projected a surplus of 261 million dollars and yet they are requesting a nine percent raise from commercially insured vermonters Blue cross holds about 135 million in reserves for all of the lives we cover Our members are using those reserves right now to cover all the costs of over testing and treatment With this surplus why are they not funding their increased needs through their own reserves? Why must the consequences of these decisions always fall on the commercially insured rate payers? I would also say that everything that patrick looney spoke about on reserves also applies to insurer reserves One sec. I gotta Member holmes just this week testified to the legislature that medicaid and medicare reimbursements are not keeping place with inflation and the current strategy of relying on commercial rates Paid by the privately insured to cover these rising health care costs is no longer viable or sustainable Even the green mountain care board approved higher and higher commercial rates. There are not enough privately insured vermonters to afford them We wholeheartedly agree and that continuing to pass these costs along Unconditionally to the shrinking pool of the commercial payer is not an option The green mountain care board needs to hold hospitals accountable for meeting their annual budgets and balancing both cost pressures and expenses No one is emerging from the pandemic unscathed Vermonters and the employers we need to manage need to manage within their limited budgets And resources vermoners do not have the ability to ask for 9% mid-year wage increases and hospitals should not have that ability either Thank you for considering our comments Sarah not to put you on the spot, but since ruttland has not asked you Would blue cross Grant the 9% if it was given and would that impact Discussions for next year's budgets and rates Uh, so chairman millen. I can't say whether or not we would grant the 9% We haven't begun talking to them about it at all, but certainly it would impact rates Thank you, sarah. Next i'm going to call on joe crouse joe Thank you, kevin It was not my intention to speak but hearing the discussion is unfolded. I feel compelled First of all, um, so everyone knows I've served in the board of the ruttland regional medical center for seven years The last two is chair You have a very hard job to do as a gree mountain care board Virtually impossible given the conflicting Forces that you must balance And I just like to thank you for that. Um, we know this is not an easy job Today the focus has been exclusively on costs I'd like to say a couple of things that are that are my colleagues wouldn't You also have to consider what do you get for those costs? And in ruttland regional, I think our community gets a great value There are only two hospitals in vermont that have achieved Magnet certification by the nursing association of america ruttland and southwestern vermont That's a rare And it is critical to our Attracting and keeping sound nurses. So when we talk about the things we're doing With the dollars that you have may be giving us we are investing them the best way we have In addition, one of the best measures for, uh, hospitals function is its safety rating And when you look at the all of vermont's hospitals, I think there's 13 The hospital with the highest safety rating by far based upon the leapfrog analysis Every year is the ruttland hospital So as we ask for additional funding here I want you to take some comfort in knowing that these dollars can be spent carefully and thoughtfully And not frivolously and we're going to provide the best outcome to our communities. We possibly can Having said all that The system we have as you acknowledge is not sustainable If medicare continues to to pay the rate it does and medicaid We'll all be gone And for for some hospitals, that's a possibility because when you look at the vermont landscape Most of vermont hospitals are within an hour of a major medical center That is not true of our little hospital in ruttland If our hospital had to cut services, which is typically the first thing you would do Our patients would have to drive Great distances to either albany Burlington or handover well over an hour to get services That's not true of other hospitals in vermont. In fact, it may not be true of any other hospital in vermont So cutting services for us is not something we take lightly And in fact, I can assure you that all the questions that the care board asked today of claudio and julia and julie Excuse me, judy. They've heard from their board of directors time and time again So though if we can't cut services effectively the only thing we can do is really work to get our Community as healthy as it possibly can so they don't find themselves in our emergency department Or in our surgical suites To that and we're doing something that I think no other hospital in vermont is doing and again I apologize for bragging, but you need to understand this We are working our butts off to form what is called the ruttland health alliance in conjunction with both The community health care services all the the family doctors in the ruttland region as well as ruttland mental health We're forming something called the ruttland health alliance. It doesn't make headlines. It's not real sexy But it is our belief that the only way that we are going to be sustainable is to have a community That needs our services to a lesser degree than they do now Basically working hard to achieve the one care model That the green mountain care board and the state of vermont has said the direction we're going in We've already allocated $500,000 to that effort $500,000 we really don't have if you heard today because we think it is so important to the future of our organization and And I can tell you that this effort is going to take More dollars in the near term Hopefully in the longer term it will save us costs and provide a better community So I just want to conclude again by thanking you letting you know that whatever you give us Will be will be put to great use We are going to continue to provide outstanding services for every dollar we get and we're going to work hard to find solutions to what is currently An unsustainable arrangement I don't know what more you can ask of us So thank you so much again, and thank you for kevin for the opportunity for a couple of minutes of commentary Thank you. Joe next we'll turn to sam peish from the health care advocates office Thank you chair I'll give it briefs. I know we're at 10 o'clock Just a couple of concerns. I worry about the precedent that risks being set by At least in part responding to what I would say are periodic often cyclical and historically inevitable downturns and market performance just speaking to the investment returns And it's also concerning to me that it seems like RMC does not have a contingency plan if this charge request is not approved beyond the only alternative proposed Change being cutting services for Vermonters and just to remind I mean, I think everyone is hopefully acutely aware But it bears repeating These charge requests aren't shouldn't be considered just in a vacuum. It's beyond Just simply ensuring stable operating margins and profitability If this charge request is improved We're in practice deciding that some of these factors are more important than ensuring affordability Which is of course a continuing concern to us and I think to others Board comments speaking to the unsustainability and diminishing effectiveness of these rate increases over time also to me Speaks to the importance of studying the utility of transitioning to global budgets And I want to thank the board for considering this shift Thanks a lot back to you chair Thank you sam other public comment Hearing none. I know that we've surpassed the 10 o'clock time limit that you had claudio and judy and I apologize for that Clearly we'll finish our discussion for today here, but we'll come back to this As soon as We can get everybody's schedule to align my guess is that's going to be next wednesday but claudio Cara christ from our staff will be reaching out to Figure that out and hopefully we can have a conclusion for your request One way or the other next wednesday Appreciate it appreciate the time today and for your consideration Thank you claudio. Thank you judy. Yes. Thank you With that does any board member have any uh old business? Does any board member have any new business? If not, is there a motion to adjourn? So moved Seconded It's been moved and seconded to adjourn all those in favor. Please signify by saying aye All right Any opposed please signify by saying nay Thank you everyone and have a great st. Patrick's day May the luck of the irish be with everyone today