Lawmakers Hear Testimony on Hospital Drug Markups, Reserves and an Amendment to Exempt Critical Access Hospitals

A committee hearing of the Vermont House Committee on Health Care on May 21 featured extended testimony about proposed limits on hospital-administered drug markups and related commercial rate actions, with witnesses and officials debating who should bear the costs and whether hospitals can use reserves to bridge a transition.

The discussion centered on draft legislation referenced in testimony as H.482 and H.266 and on how price pressure on hospitals would affect patients, insurers and hospital finances. An unidentified testifier who said they were speaking on H.266 told the committee: "I do find it cruel to charge enormous markups on life saving treatments, to patients who are incredibly sick." That witness urged the committee and hospitals to use reserves and other tools to avoid pushing costs onto cancer and chronic-disease patients.

Why it matters: Committee members and witnesses framed the proposal as a response to what one witness called “Vermont is the highest, most expensive state in The United States Of America for hospital administered drugs.” Testimony tied hospital pricing to higher patient copays, risk to local employers with self‑insured plans and market consolidation that can move care into higher‑priced hospital settings.

Key facts and figures cited in testimony

- Independent monitor for the Green Mountain Care Board: Devin Green of the Vermont Association of Hospitals and Health Systems corrected his earlier testimony, saying, "The independent monitor for the Green Mountain Care Board is up to $1,000,000." He said his prior written testimony had incorrectly combined the monitor amount with consultant funding.

- Settlement consultant pool and related funds: Owen Foster of the Green Mountain Care Board told the committee the larger $15,000,000 figure discussed in some materials includes funds retained by hospitals for consultant teams to redesign operations, and that the board’s liaison team's portion "will be around a million dollars give or take." Foster said the consultant pool (the larger portion of the $15 million) would be used for transforming UVM Health Network operations or for other settlement‑consistent purposes if not spent on consultants.

- Hospital liquidity and reserves: The unidentified witness presented financial snapshots for UVM Medical Center and the health network, citing cash, short‑term investments and board‑designated assets in multiple line items and saying the medical center had "about a billion" in certain forms of assets and that the network had additional restricted assets. The witness summarized days‑cash‑on‑hand measures and said UVM Medical Center showed roughly 145 days cash on hand in their view; other hospitals were described as having higher or lower days‑cash‑on‑hand by comparison.

Discussion highlights

- Patient impact: The witness used a hypothetical to illustrate the patient effect of high markups, saying a drug with a 600% markup could raise annual patient costs significantly after copays and deductibles and that patients struggling with serious illness are harmed by high out‑of‑pocket costs.

- Market consolidation and price differentials: Testimony contrasted reported markups at hospitals with reimbursement levels at independent practices, citing Champlain Valley Oncology as being reimbursed at about 110% for certain drugs while hospital markups were described in testimony as multiples (scores of hundreds or thousands of percent on some items). The witness said consolidation of practices into hospital systems risks moving care into higher‑priced settings.

- Use of reserves and restricted assets: The witness argued reserves could be used to "buy time" while system redesign efforts proceed, but also acknowledged limits and lender/credit implications. Committee members asked whether the cited cash and other assets were unrestricted and how liabilities might offset those amounts.

- Insurer and claims questions: Committee members pressed on the insurer side, asking whether claims spending drives premium increases and whether Blue Cross Blue Shield data could be used to steer high‑cost care to lower‑cost settings. The committee discussed contested rate filings and the limited public record in those proceedings.

- Amendment exempting critical access hospitals: The testifier said the bill included an amendment to exempt independent critical access hospitals (including Newport, St. Johnsbury, Copley, Springfield and others named in testimony) from the bill’s provisions; the witness expressed support for that amendment and noted the differing financial positions of those hospitals.

Authorities and reports cited

Committee members and witnesses referred to H.482 and H.266 (bills under consideration), the Green Mountain Care Board and its settlement agreement, the Oliver Wyman report and work by the state Agency of Human Services (described in testimony as the RHRC or related health‑redesign work). The federal 340B program also was discussed in the context of prior legislative changes that affected hospital revenue flows.

Quotes (from witnesses and officials in the hearing)

- Devin Green, Vermont Association of Hospitals and Health Systems: "The independent monitor for the Great Mountain Care Board is up to $1,000,000."

- Owen Foster, Chair, Green Mountain Care Board: "The liaison team is 3 people. They make they're being paid $250 per hour for their work. We have not set a hard cap, but we've been discussing that that portion of the $15,000,000 will be around a million dollars give or take."

- Unidentified testifier (public witness): "I do find it cruel to charge enormous markups on life saving treatments, to patients who are incredibly sick." The witness later added, "If you vote for this bill, you're voting to help those patients and to help the immediate crisis of our healthcare affordability problem."

Outstanding questions and next steps

Committee members asked for clearer insurer data, for evidence that hospital cost‑reduction commitments would translate to lower premiums and for more precise fiscal math in contested rate proceedings. Witnesses and staff noted that contested rate filings produce a limited public record and that some of the state’s redesign work is ongoing and may not yet produce concrete insurer commitments. No formal committee vote or motion was recorded in the transcript segment provided.

The committee recessed after the testimony and indicated it would continue consideration of the bills and related amendments in subsequent proceedings.