The state’s most powerful healthcare regulator thinks Vermont’s 14 hospitals can keep costs low, provide care and find financial sustainability. Not all the hospitals agree.
In budget orders handed down Monday, the Green Mountain Care Board built on its efforts last year to shrink hospital budgets.
This year, the independent state regulator focused on not only reducing hospital revenue, but also on how much of that revenue can come from commercial insurers, a figure closely tied to Vermonters’ insurance costs.
“Historically, this is really where the hospitals have gone if they need to balance budgets: They ask Vermonters to pay more, and that’s no longer an avenue,” Owen Foster, who chairs the care board, said in an interview.
Foster hopes the care board’s latest actions will push hospitals to find ways beyond what they charge patients to collect revenue and balance their budgets. That will require more work on hospital efficiency and sharing services among them, he said.
The budget orders put more pressure on a hospital system already grappling with its sustainability. Some hospitals worry that cutting expenses and revenue too quickly risks their long-term financial health and services, while others have said the stricter budgets will push them to rethink how Vermont delivers healthcare.
The budget orders for the next fiscal year allow Vermont’s hospitals to collectively bring in nearly $1.94 billion in commercial revenue, a 1.2% decrease from last year.
Most hospitals were ordered to shrink the prices they charge commercial insurers by around 1%. Only two hospitals were allowed to increase those rates: Northwestern Medical Center, which has relatively low prices, and Springfield Hospital, which is still rebuilding from bankruptcy, can increase their rates by 2%. The University of Vermont Medical Center saw the most drastic commercial rate reduction at 4.4%.
The commercial rate reductions should slow increases in Vermonters’ insurance premiums. In August, the care board set modest premium increases for plans sold on Vermont’s Affordable Care Act Marketplace this coming year. The care board regulates only plans sold on the exchange. Those increases are meant to correspond with the coming year’s hospital price reductions.
Vermonters pay some of the highest health insurance premiums in the country.
Keeping costs low is not just about access to healthcare, as it perhaps once was, said the state’s healthcare advocate, Mike Fisher, during an Aug. 3 meeting of the care board. It’s about making sure that hospitals don’t price themselves out of a customer base.
“This market does not function without enough people being able to afford coverage and care,” Fisher said.
Vermont hospitals and rural hospitals all across the country are under serious financial pressure. Expenses are mounting while patients drop increasingly expensive coverage or lose Medicaid eligibility, reducing hospital revenue.
In Vermont, hospitals are adapting to these dynamics and a new state law that capped how much they can mark up certain medicines. The law has lowered drug prices for patients and left hospitals seeking ways to adapt.
Vermont’s hospitals collectively expect to end this fiscal year in the red for the first time since the COVID-19 pandemic, and the same is expected next year, according to the just-approved hospital budgets for the fiscal year beginning Oct. 1.
“I think that every decision made today will further destabilize the financial outlook of our hospitals,” Michael Del Trecco, who leads the Vermont Association of Hospitals and Health Systems, told regulators after their budget decisions Monday. “It’s clear to me that as financial conditions erode, so does the ability for hospitals to invest in their communities and workforce and support transformation.”
At the start of 2026, the hospital association created an affordability plan, pledging to trim $330 million in expenses by 2028, in line with recommendations from a 2024 healthcare redesign report the state commissioned.
Hospitals have collectively cut expense growth by more than $57 million from what they projected for the 2026 fiscal year, according to the hospital association. Monday’s cuts are expected to add to that total.
Still, Del Trecco worried that cutting spending too quickly leaves hospitals unsteady and will ripple through communities. In an August letter to the care board, he said that 60%-70% of every dollar a hospital spends is related to its workforce. “That means, substantial additional reductions inevitably translate into fewer jobs, reduced services, delayed investments, or some combination of all three,” he wrote.
Many of Vermont’s hospitals have little in reserve to fall back on. Even University of Vermont Health, which has significant reserves, worried that a sudden change, such as a dip in the stock market or a strike, could precipitously eat into its cache.
Affordability matters, Del Trecco said, but he also stressed that the state should not let that focus eclipse efforts to improve care quality.
Foster, the care board chair, said hospitals can balance their budgets next year without raising prices. Hospitals could create more efficiencies internally and work with the Vermont Agency of Human Services to share services, he said. They should leverage the millions of federal rural health dollars Vermont is poised to receive over five years and work with Medicaid to change its fee schedule on services that Vermonters cannot afford to lose, he added.
“I think there is a big opportunity with the board’s decisions,” he said. “There’s enough money. We’re just not spending it so that it’s aligned with our values.”
This story was first published by VTDigger and is republished with permission as part of the Vermont Journalism Trust’s Community News Sharing Project.