UVMMC’s Administrative Labor Costs Reveal Great Opportunity for Savings
VHC911 – Stat v.4
High hospital costs are a main driver behind Vermont’s highest in the nation health insurance costs. To begin understanding why Vermont stands out, our recent newsletter asked why the University of Vermont Medical Center (UVMMC ) fails do what 77% of their peers do – break even or make money serving Medicare patients. Today we look deeper to uncover where UVMMC is spending resources compared with other Academic Medical Centers (AMCs) across the country and where significant savings can be found.
Out of 107 AMCs, UVMMC reports the 14th highest non-patient labor costs
The National Academy for State Health Policy (NASHP) breaks hospitals labor costs into two broad buckets: (1) costs for patient care, and (2) non-patient care labor costs that support hospital operations. The latter includes custodial services, information technology, food services, human resources, and of course, administration and management.
When it comes to labor costs for patient care, UVMMC is just 1% over their peers – basically in line with the average. They should be applauded for wise management of these costs while delivering high-quality care to Vermont.
UVMMC costs for non-patient care labor costs reveal a different – and alarming – picture. Overall, for non-patient labor costs, our biggest hospital runs 31% over its peers. The story is even more dramatic when we examine the labor costs attributed to administration and management – a subset of non-patient care labor costs. Here, UVMMC comes in 73% higher than 106 other AMCs across the country.
Figure 1. Labor costs per hospital discharge.
UVMMC has stated that its high costs are in part due to the fact that they are both an AMC as well as a community hospital providing primary and specialty care to lower acuity patients in the communities they serve. However, the vast majority of the 107 AMCs used in this comparison also function as community hospitals in their regions. Many also include satellite offices offering primary and specialty care. And many operate in urban as well as suburban and rural settings. In all these aspects, UVMMC is a typical AMC.
Another reason that UVMMC often cites to justify its costs is that it serves an aging population, suggesting they take care of an older and more complex population than other AMCs. But it’s hard to imagine that patient mix demands 73% higher administration and management labor costs. Besides, many Vermonters receive their care at Dartmouth Hitchcock and Albany Medical Centers, and a comparison shows that these two AMCs have substantially lower labor costs even though they deliver care in the same region.
Figure 2. Comparison of labor costs at UVMMC, Dartmouth Hitchcock, and Albany Medical Centers
UVMMC’s labor costs for administration and management are extremely high and create an opportunity for savings without impacting patient services
Most AMCs across the country, including those that border our state and deliver care to Vermonters, can provide high-quality patient care with lower non-patient care labor costs, especially labor costs for management and administration. This data indicates an opportunity for Vermont’s state regulators and payers to work with UVMMC to lower their operating costs without reducing services to patients.
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 the NASHP Hospital Cost Tool Data Set, Release Date December 20, 2024 NASHP Hospital Cost Tool | Overview.