Vermont hospitals need to cut spending drastically — but do their plans deliver?

When, in 2024, a consultant assessed the state of healthcare in Vermont, the picture was stark: Vermont’s hospitals needed major restructuring, or they risked a collective budget deficit between $700 million and $2.4 billion by 2030.

Last year, the Legislature formally tasked the Agency of Human Services with coordinating that restructuring work across hospitals, including a requirement to reduce hospital spending for fiscal year 2026 by 2.5%.

In April, Vermont’s 14 hospitals delivered individual plans for change to the agency. Some hospitals offered cost-sharing plans, such as pooling supplies and administrative services, while others proposed moving care out of hospitals, such as through hospice or telehealth at home.

Yet when it comes to predicting what the projects will cost and save each hospital and the state, the numbers are rough or nonexistent.

The plans are a starting point, said Katelyn Carrell, who leads care transformation for the Agency of Human Services. They include only projects that hospitals are already implementing and are subject to change as new plans emerge, she said.

While some healthcare stakeholders see the hospitals’ plans as an important step toward cost savings, others are frustrated that the Agency of Human Services hasn’t articulated a more cohesive, cross-hospital vision and hasn’t quantified how much these changes could save hospitals and Vermonters.

“What are the financial savings that are going to be achieved?” said Owen Foster, the chair of the Green Mountain Care Board, in an interview. He doesn’t see any cost reduction in the plans, he said, nor does he see any math that even suggests the agency is tracking toward any kind of savings.

“There’s a mismatch of urgency here,” Mike Fisher, the state’s healthcare advocate, said. These are not plans that, to his mind, reflect the dire financial realities that hospitals are facing and will face in the coming years. But that high level of guidance and coordination can only come from the state, he said.

For the hospitals themselves to make calls on who should cut and keep which service lines could run afoul of antitrust laws, said Devon Green, the vice president of the Vermont Association of Hospitals and Health Systems. She appreciates that AHS is leading the transformation work where hospitals cannot.

Staring down the financial realities

Foster, the care board chair, said he is alarmed that the hospitals’ plans do not account for major impending changes in the healthcare landscape that are expected to erode hospital revenue.

For one, the Green Mountain Care Board is working to set a cap on hospitals’ charges by linking service costs to a percentage of what Medicare pays.

Further, hospitals expect to lose revenue as more people drop expensive commercial insurance and forgo care. Changes to Medicaid, set to take effect next year, are also predicted to drastically reduce hospital revenue.

“That piece is totally absent from the hospital transformation plans, and that’s concerning,” Foster said.

He worries about whether hospitals will be able to make ends meet with these severe cuts to their revenue, but only modest changes to spending.

“That necessitates that you evaluate and look at the financial realities that are coming,” he said.

Actually calculating that is difficult, said Carrell, the state human services official, and the agency does not have the capacity to calculate it on its own. Her team is in the process of bringing on a contractor to conduct higher-level cost analysis, but the agency is not ready to discuss an agreement, Carrell said.

Not having the contractor in place meant the agency was limited in its ability to guide hospitals in estimating the costs and savings of their plans.

The template AHS gave hospitals includes a column requesting a “dollar entry” of the investment required for a proposed change and another requesting the potential cost savings. Most of them are filled with “approximate” estimates and “TBDs.”

“If you look at the plans, those are not numbers and columns that we could total,” Carrell said.

The total cost savings remain elusive.

“We really want to be able to say how much we think it will end up saving,” Carrell said, “but we’re just not at a place where we could say those kinds of things concretely.”

Hospitals, for their part, have made estimates of varying degrees of specificity.

Southwestern Vermont Medical Center, in Bennington, Vt., is launching a primary care bridge program so that people who often show up in the emergency room but have no primary care doctor can still access earlier preventive care. The hospital estimates it would cost $250,000 to establish and predicts it could save $625,000 of overall healthcare spending if enough patients are diverted from expensive emergency room visits.

The hospital wants to keep expanding primary care access by establishing a family medicine residency in Bennington, through its affiliation with Dartmouth Health. The program should take $20 million to establish, and should yield “many multiples” of that in savings. But it’s too early for the hospital to predict what those numbers might actually be, Dr. Estevan Garcia, the hospital’s CEO, told VtDigger.

Gifford Medical Center in Randolph proposes increasing the number of inpatients it can accommodate to reduce demand at UVM Medical Center and Dartmouth Hitchcock, while also increasing income. The hospital is also in the process of contracting to share a radiologist group with Rutland Regional Medical Center, after losing its in-house radiologists. How much those initiatives might yield in savings remains to be seen, according to CEO Michael Costa.

Still, the plans only reflect actively ongoing work. Notably absent is any mention of how Rutland Regional Medical Center might address the challenges of the low volume it faced in its pediatric inpatient beds.

At the end of 2025, the Rutland hospital announced it intended to close its pediatric inpatient beds, but eventually withdrew its proposal from the Green Mountain Care Board, which would have had to approve the closure. Instead, hospital leaders said they would address the issue through the agency’s transformation process. However, the April plan makes no mention of the pediatric inpatient beds at all.

“RRMC is continuing to work closely with AHS …,” Traci Moore, a spokesperson for the hospital, wrote in a statement. “At this time, there has not been a decision made as to the proposed pediatric transformation.”

Who decides what to cut, and where?

Fisher, the healthcare advocate, fears that without stronger guidance from the agency, hospitals will have to make decisions based on their own financial realities, rather than the systemwide costs and losses.

“You can’t expect hospitals to make proposals about what they should be doing, given the regional needs and decisions that other hospitals are making. They don’t know! It takes a facilitator,” he said.

Yet Carrell and her colleagues at AHS say it’s the Green Mountain Care Board’s job to set stricter financial guardrails for hospital budgets, and to help hospitals achieve those savings.

“Our role in the system is kind of squishy, because our job is to help hospitals get to those benchmarks,” said Ted Fisher, a spokesperson for the agency.

Sen. Ginny Lyons, D-Chittenden Southeast, who chairs the Senate Health and Welfare Committee, has long wanted to see the individual hospitals’ reports of savings and efficiencies.

“How are they bringing the $100 to $200 million in savings?” she asked. “I want to make sure that they are making the savings and see where those savings are going.”

Still, even with major changes, costs may not come down all that much, Green, with the hospital association, warned.

“I worry that people see transformation and they think a whole new healthcare system is going to cost way less, and all our problems are solved,” she said. “The savings may not be as great as people anticipate.”

She cited a section from that 2024 consultant report, which suggested closing inpatient units in four hospitals, to yield $20 million a year in savings. That’s a big loss to communities, with a relatively small monetary payout, she said.

The House’s Democratic Majority Leader, Rep. Lori Houghton, D-Essex Junction, has historically pressured the Agency of Human Services to close this hospital spending gap. She thinks that, finally, things are moving in the right direction, as hospitals have all come to the table with plans to share services and lower costs, but she’s been frustrated by how long it has taken.

She acknowledges that the entire enterprise of coordinating care across disparate hospitals is itself a massive undertaking, even if it’s not paying off as quickly as Vermonters might hope.

“What they’re doing is bold for them at this moment in time,” she said. “It is the first step of saying, ‘We are going to work with other hospitals,’ and that just doesn’t normally happen.”

This story was republished with permission from VtDigger, which offers its reporting at no cost to local news organizations through its Community News Sharing Project. To learn more, visit vtdigger.org/community-news-sharing-project.