Panel weighs changes to hospital budget review, debates treatment of primary-care revenue

A legislative committee on Jan. 26 reviewed proposed changes to the hospital budget review statute that would require the board to consider a statewide health care delivery plan, the health resource allocation plan (HRAP) and the financial operations of hospital networks, and debated whether to exclude revenue from primary care, mental-health and substance-use disorder treatment when calculating a hospital’s net patient revenue and any total cost-of-care targets.

The discussion matters because the board’s budget review and the state’s total cost-of-care framework guide how hospitals set prices and invest in services. Proponents of excluding those revenues said exclusion could encourage hospitals to expand primary care, mental-health and substance-use treatment without being penalized by revenue caps. Opponents said excluding that revenue would omit an important part of hospitals’ finances and could hide consolidation or other effects of hospitals acquiring primary-care practices.

Jen Carvey, legislative counsel from the Office of the Legislative Council, opened the committee’s review by summarizing where the draft adds a requirement that “the board must consider the statewide health care delivery plan once established, including the total cost of care targets and consult with the Agency of Human Services to ensure compliance with federal requirements regarding Medicare and Medicaid.” Carvey also summarized existing law that requires the board to consider the health resource allocation plan (HRAP), past and proposed expenditure analyses, and reports from professional review organizations.

Representative McFallon asked how the statewide health care delivery plan differs from HRAP, saying, “I’m still not quite sure where they differ.” Committee members answered that HRAP identifies needs and how resources are allocated, while the statewide delivery plan builds on HRAP and other information to plan delivery across the state. The committee noted the HRAP statutory section referenced in the draft as Section 94 0 5 and that HRAP must be revised periodically, “but not less frequently than once every 4 years.”

The committee debated a draft provision that would exclude revenue derived from primary care, mental-health and substance-use disorder treatment when determining a hospital’s net patient revenue and any total cost-of-care targets. One committee member summarized the policy intent: excluding those revenues would “support investments and spending on primary care, mental health care and SUD treatment by excluding it from caps.” Proponents said the change was intended to remove a disincentive for hospitals to expand those services because added revenue could otherwise push a hospital over a cap.

Other members pushed back. One committee member said excluding that revenue “means you’re saying charge whatever you want, spend as much on expenditures for these things as you want because it doesn’t matter,” and argued the board needs visibility into expenses and revenues to understand how care is being delivered and financed. Members also raised concerns about hospitals buying primary-care practices and said excluding the revenue could obscure consolidation effects. The committee discussed alternatives, including directing the board to quantify revenue from those categories or to “consider” rather than “exclude” those revenues.

Committee members noted the Green Mountain Care Board had recommended using “consider” language. A member observed that “shall consider” is a lower-strength directive than other options and asked the committee to decide its policy goal: whether to require comprehensive accounting of all revenues or to create an explicit carve-out to encourage particular services. During the session the body agreed to change the draft wording from “exclude” to “consider” in the next draft, with the committee’s clerk to renumber the section accordingly.

The committee also reviewed draft language requiring reporting and comparisons of executive and clinical leadership compensation, including variable payments and incentive plans, and of the number of administrative employees compared with staff who deliver health care directly to patients. Members said that data could help the board assess inefficiencies (for example, divergent billing or coding staff counts across hospitals) and compare base salaries and total compensation at different levels.

No formal vote was recorded on the draft statutory language during the session. Committee members agreed to continue the discussion at a later meeting and to carry the revised language forward in the next draft for further review.

The committee scheduled further consideration of the hospital budget review provisions for a subsequent meeting, where members said they will refine the statutory language and any definitions (for example, a single definition of “hospital network” that could apply across related sections).