Opportunity for Savings at Vermont's Community Hospitals
VHC911 – Stat v.6
VHC911 continues to explore how hospital costs drive Vermont’s health insurance costs to the point of being the nation’s most expensive. Our recent newsletter highlighted how non-patient care labor costs at the University of Vermont Medical Center (UVMMC) are among the highest in the country compared to other Academic Medical Centers (AMCs). Reducing these non-patient care costs offers a significant opportunity to lower healthcare costs without reducing services for Vermonters.
Today we examine Vermont’s 5 small-city rural hospitals (community hospitals) in the same light. These hospitals serve an essential role providing healthcare across the state and are compared to 45 similar community hospitals in our region.
We use data from the National Academy for State Health Policy (NASHP) which breaks hospitals labor costs into two broad buckets: (1) costs for patient care, and (2) non-patient care labor costs that support hospital operations. These include custodial services, information technology, food services, human resources, and of course, administration and management. For this newsletter, we focus on non-patient care labor costs, including administrative labor costs, in order to identify opportunities for savings without reducing services.
On average, Vermont’s five community hospitals have higher patient care and non-patient care labor costs than 45 similarly sized hospitals in our surrounding region. Figure 1 shows that Vermont’s community hospitals average 31% higher on non-patient care labor costs and 56% higher on the subset of management and administrative labor costs.
Figure 1. Labor costs per discharge at community hospitals.
While some of Vermont’s community hospitals have very high non-patient care labor costs, the variation among these five hospitals highlights opportunities for cost savings.
Out of the 50 community hospitals included in the evaluation of labor costs for non-patient care, three of our five hospitals are among the 10 most expensive. Central Vermont Medical Center ranks 4th, Rutland Regional Medical Center is 6th, and Brattleboro Memorial Hospital is the 9th most expensive. On the other hand, Northwest Medical Center is 24th and Southwestern Medical Center is 27th – both closer to the group average for non-patient care labor costs.
The picture gets worse when we break out administration and management labor costs as a sub-group of non-patient costs. Looking at administrative labor costs, four of Vermont’s five community hospitals rank in the top 10 (Figure 2). Only Rutland Regional stands out as having administrative labor costs in line with regional peers.
Figure 2. Management & Administrative labor costs at community hospitals.
The variation in these non-patient care labor costs highlights an opportunity for Vermont’s hospitals to learn from each other how to operate more cost effectively while preserving access to services. The results also highlight the opportunity to understand how similarly sized hospitals outside of Vermont operate more cost effectively, including those in Maine which care for a population that is on average older than the population in Vermont.
VHC911’s research reveals that UVMMC and our 5 next largest hospitals could reduce non-patient care labor costs and reduce health insurance premiums for Vermonters.
Upcoming newsletters will look further into examples in Vermont and elsewhere where hospitals and health systems have reduced operating costs while maintaining high-quality, high-value care.
Data from this analysis comes from NASHP Hospital Cost Tool Data Set, Release Date December 20, 2024.
In case you missed it
Last week the Green Mountain Care Board heard from Dr. Pronovost, a nationally recognized leader in patient safety and healthcare innovation who described the transition underway at University Hospitals Health System in Cleveland. This system reduced the annual cost of care for Medicare patients by 30% over three years while improving quality.
Dr. Pronovost described the cultural shift that was needed to make this transition at his health system. The whole presentation is worth watching but for anyone pressed for time, this link brings you right to the data portion of the presentation. It offers many lessons for us here in Vermont.