Regulator tells Vermont hospital to dial back surgeries, revenue

MORRISVILLE - Copley Hospital's orthopedic surgery practice in this Lamoille County village of about 2,000 people attracts patients from Chittenden County and beyond for knee replacement and shoulder surgeries.

That's a problem for the Green Mountain Care Board, which has come down on Copley for making too much money and doing too many surgeries. Copley's success is seen as a violation of the Board's master plan for managing health care costs in the state.

Vermont's health care system does not operate on the principles of free enterprise. It is regulated by the Green Mountain Care Board, through the certificate of need process, with the stated mission to reduce the rate of health care cost growth while ensuring a high quality, accessible health care system. 

 Certificates of need awarded to all health care facilities come with conditions, like how much "net patient revenue" hospitals can make and how many surgeries they can do. 

Copley is at risk of being sanctioned by the Care Board for exceeding its expected revenue.  This year the Care Board ordered two hospitals in the University of Vermont Health Network to use about $11.6 million of last year's surplus to reduce commercial insurance rates.

Neither Art Mathisen, CEO of Copley Hospital, nor Kevin Mullin, chairman of the Green Mountain Care Board, would agree to be interviewed for this story, citing ongoing discussions between the hospital and the Care Board.

Senate President Pro Tempore Tim Ashe said the theory is, without certificate of need laws, Vermont would end up with too much health care infrastructure, increasing costs.

"Everyone would have to pay more for stuff," Ashe said.

The Green Mountain Care Board also worries, Ashe said, about Copley creating a "cash cow" through the success of its orthopedic surgery practice. According to an April 2017 report from the Department of Vermont Health Access, the median cost of a total knee replacement at Copley in 2015 was $46,123, compared to $36,819 at UVM Medical Center.

"That's where some people will say we should get rid of the certificate of need laws altogether, just have open competition and it will bring down the prices," Ashe said. "I'm not sure that plays out that way in every instance."

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Vermont's rural hospitals, he said, survive in part because they've been granted monopoly status.

Rep. Heidi Scheuermann, R-Stowe, has a hard time understanding why it's bad to build a successful orthopedic surgery practice in a small Vermont town. 

"We have young, very highly capable doctors right here in north central Vermont," she said. "We have people who want them to be their doctors. That demand is there, and that's a good thing. Only in this bizarro world of centralized planning is this a bad thing."

Scheuermann said she's hopeful the Green Mountain Care Board will realize the benefits of Mansfield Orthopaedics, a practice of Copley Hospital, and "understand that this is a good thing." Consumers should have a choice of where to go, she said.

"If they choose to go to UVM Medical Center, fine, that's great," Scheuermann said. "But they should also be able to choose to go to Mansfield Orthopaedics." 

The Board issued Copley a certificate of need in February 2016 for the new $12.5 million surgical suite where the hospital's orthopedic surgery practice has flourished. In addition to granting certificates of need, the Care Board approves the budgets of the state's hospitals and monitors their growth.

At a Sept. 7 meeting of the Green Mountain Care Board, board member Maureen Usifer noted Copley's attraction for patients from Vermont's most populous county, saying, "It seems when I talk to anyone in the Burlington area, anyone who gets surgery goes to Copley."

Usifer noted that if Copley is drawing patients from outside its immediate area, "we need to see that offset in the system at other hospitals." 

In other words, if Copley is doing more surgeries, some other hospital(s) in Vermont have to do fewer surgeries.

Ashe explained that patients going to Copley from other parts of the state are not going to hospitals in their own area that offer the same surgeries, and have the same infrastructure, which risks those facilities sitting idle.

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"If you don't lose the fixed costs of the staffing and equipment for knee replacements at (the other hospital), everybody who goes to your facility is paying for something that's adding no value," Ashe said. "That's going to be a tiny portion of every person's bill, paying to keep those fixed costs."

On Nov. 2, Judy Henkin, the Care Board's general counsel, sent a letter to an attorney representing the hospital concerning "Copley Hospital's compliance with the Certificate of Need (CON) condition that requires it to adhere to all hospital budget guidelines and directives, including the Board-imposed limit on net patient revenue (NPR)."

Henkin goes on to say that Copley is doing too many surgeries and making too much money, referring to testimony given by CEO Art Mathisen concerning the hospital's net patient revenue.

"At hearing, Copley's CEO informed the Board that the overage was attributable to utilization beyond that projected in the CON application, and to the success of Copley's orthopedic program," Henkin wrote. "CEO Mathisen personally took blame 'in a good way' for the increased utilization, explaining that the hospital had become more efficient under his watch, could perform more orthopedic surgeries and procedures in the newly constructed surgical suite, and that this in turn increased patient access to care."

Mathisen said that he "essentially intended this result," of becoming more efficient and doing more surgeries, but asked that Copley "not be faulted or penalized" for failing to accurately predict in its certificate of need application how many more surgeries it would be doing in its new surgical suite.

In her letter, Henkin said the Care Board was going to hold off on an enforcement action that could trigger sanctions, provided the hospital brings its net patient revenue growth in line with a Board-imposed cap, and achieve "overall cumulative compliance" with the Board's budget orders.

The sanctions  could include a civil administrative penalty of $100,000 or one-tenth of 1 percent of the gross annual revenues of the health care facility, whichever is greater.

Mathisen addressed his Dec. 1 letter in response to Henkin's letter to Kevin Mullin. In it, he said Copley filed its certificate of need application "with every intention of operating within the (net patient revenue) target imposed," by the Green Mountain Care Board. 

However, Mathisen wrote, "health care is fluid," and Copley could not have met the targets set by the Care Board for net patient revenue "without impairing our financial sustainability or limiting access to needed health care services."

Henkin made clear the Board was was not asking Copley to "restrict patient access or to become less efficient."

"The Board's order that Copley manage its budget and limit its revenue growth to the targets set by the Board — as it unambiguously assured the Board that it would do during the CON process — does not equate with requiring it to turn away patients in need of care," Henkin wrote.

Dr. Bryan Huber, department head of orthopaedic surgery at Copley Hospital, admits to frustration with the position Copley finds itself in with the Green Mountain Care Board, especially since the American Academy of Orthopaedic Surgeons predicts total knee replacement surgeries will grow 673 percent to 3.5 million yearly by 2030.

"I think we need to work together as a team, a system, not necessarily that we're all controlled by a system, but that there is a more altruistic group that needs to look to the future," Huber said. "Where can we deliver this care? Who's best at delivering it? Support the people in the trenches rather than say we're going to cut back on utilization." 

Contact Dan D’Ambrosio at 660-1841 or ddambrosio@freepressmedia.com.