Green Mountain Care Board warns Vermont health system is 'at a tipping point,' outlines Act 167 transformation and policy options

Owen Foster, chair of the Green Mountain Care Board, told the Senate Health & Welfare Committee on Jan. 22 that "healthcare is at a tipping point" in Vermont and presented budget, insurer and provider data showing acute financial pressure across the state.

Why it matters: The board said rising hospital prices, greater hospital utilization, prescription drug costs and shrinking insurer reserves are combining to drive commercial premiums sharply higher, threaten insurer solvency and put hospitals and federally qualified health centers (FQHCs) at risk — with downstream effects on property taxes, employer costs and access to care.

Foster and board member Jessica Holmes summarized the board’s role and the Act 167 transformation process. Foster said the board reviews hospital budgets and rate requests — about $3.5 billion in hospital budget submissions annually — and that hospitals account for roughly 45% of statewide health-care spending. Holmes described the Oliver Wyman report produced under Act 167 as the result of an extensive, community-engaged process "literally" involving thousands of participants and said the report projects that, under a status-quo path, many hospitals’ operating margins would fall deeply into the red in coming years.

The board flagged several linked problems: high commercial hospital prices (some hospitals receive commercial payments at multiples of Medicare), rising patient acuity and utilization, and shrinking insurer reserves. The board cited Blue Cross Blue Shield of Vermont as an example of a payer whose reserves have fallen sharply from prior levels, and noted large recent approved rate increases for that carrier (board discussion cited roughly 22% for small-group and roughly 19% for individual plans in recent filings). Foster said insurers paying out more in claims than they collect worsens system instability: "We can't pay our way out of this," he said.

The presentation highlighted financial-health measures that the board uses: days cash on hand and operating margin. The board showed systemwide declines in days cash on hand from about 192 in 2017 to roughly 125 in recent budgets, and multiple hospitals showing negative operating margins in recent years. Holmes said COVID-era federal funding temporarily distorted those trends and that the more recent declines reflect budget and utilization pressures.

Holmes described key findings and recommendations from the Oliver Wyman Act 167 work: a menu of more than 140 options to reduce inefficiencies, lower costs, improve population health and increase access. The report recommends, among other things, (1) clarifying roles between the Agency of Human Services (AHS) and the Green Mountain Care Board, (2) stabilizing and redesigning hospital services — including consideration of regionalized centers of care — (3) examining certificate-of-need (CON) thresholds to reduce barriers to lower-cost competitors, (4) promoting common accounting and reporting standards across hospitals to improve comparability, and (5) exploring payment reforms such as reference-based pricing and different global-budget approaches.

On CON, both Foster and Holmes said the law can function as a barrier to market entry and that thresholds should be revisited. They cited the Green Mountain Surgery Center example as a case where the CON process added delay and expense; Holmes noted that some conditions imposed in CON approvals (for example, commitments to serve Medicaid patients and limit pricing) had public-value outcomes.

On transformation pathways, the presenters described the recently enacted AHEAD global-budget pilot (cohort 2). The transcript records that the governor signed cohort 2 and that the Green Mountain Care Board approved participation with conditions; specific vote tallies were not clearly reported in the transcript. The board cautioned that global-budget and reference-pricing reforms carry both opportunities and risks and would require careful federal waivers, alignment across payers and significant implementation resources.

The board also warned of financial strain beyond hospitals: FQHCs and community health centers reported dramatic erosion in days cash on hand and mounting operating losses. The presentation cited Little Rivers and Community Health Centers of Burlington as examples, with Little Rivers’ days cash on hand falling to single digits and systemwide community-health-center losses projected at about $2 million for the 2025 budget year.

Board members told legislators that the Agency of Human Services (AHS) is taking a lead role in the next phase of Act 167 implementation. Holmes said AHS is developing hospital-transformation workstreams and that the process will require collaboration between hospitals, AHS and the Care Board. Committee members and the presenters identified several near-term legislative items tied to that work: CON threshold bills, EMR/electronic medical record coordination, and other bills to support implementation; committee staff said those topics will be scheduled for follow-up testimony.

The hearing included questions about population health metrics, how the board measures quality, and whether population health should be a direct factor in hospital budget decisions. The presenters said quality measurement for small hospitals is challenging because small case counts produce unstable metrics and that the board lacks a single, fully developed affordability or population-health metric at present. Holmes said the board attempts to consider quality and access but that a more robust statewide plan and better-aligned data would be necessary to hold hospitals to population-health targets.

What’s next: Presenters and committee members agreed on further briefings from AHS and other stakeholders. Holmes said the Act 167/Oliver Wyman material is now in the hands of AHS for deeper design work; Foster and Holmes said that the board will return for additional testimony on CON, pricing reforms and other transformation steps.

Ending: The hearing closed with committee members scheduling follow-up work on CON thresholds, EMR coordination and other bills tied to the Act 167 recommendations. The Green Mountain Care Board told the committee that it will continue to provide budget oversight while AHS leads multi-stakeholder implementation work.