It’s been a long year for the University of Vermont Health network.

Last year, regulators took a particularly critical view of the network finances, which prompted a leadership change at the highest level of the organization, followed by significant slimming of its executive level positions. As it carried out those regulatory budget orders, charged less for certain pharmaceutical drugs and inked a 2026 contract with BlueCross BlueShield that cut what the insurer paid the hospital, the flagship medical center in Burlington found itself operating at a loss of hundreds of thousands of dollars a day. In May, an independent liaison found that the group needs to cut its expenses by $300 million in the next three years.

Then came large layoffs, cuts to employee benefits and a frantic push to see more patients.

And still, more change is in store, the state’s largest healthcare provider told regulators this week as part of its annual budget-setting process.

Every summer, the Green Mountain Care Board reviews the budget of each of Vermont’s 14 hospitals and issues binding budget orders by the start of the Oct. 1 fiscal year.

This year, the network has struck a notably different tone across the budget hearings.

“It was the most transparent accounting of our current finances, our plans for the future and the really, really challenging and difficult decisions that we’re making right now,” Dr. Steve Leffler, who leads both the UVM Health network and its Burlington flagship hospital, UVM Medical Center, told VTDigger.

It’s also the first time in recent memory that the hospital has submitted a budget with a negative operating margin.

The network expects to lose more than $14 million across the system in the coming fiscal year, even with an estimated $3.16 billion in network-wide revenue. It expects UVM Medical Center to operate at a $43 million loss.

That number, according to Leffler, “represents our best attempt to balance required expense reductions for affordability and our commitments to maintaining access to Vermonters,” he said in his opening remarks to the care board.

This year’s budget process notably prioritizes cuts to hospital expenses, while past years have focused on charging patients and insurers less — and thus, decreasing revenue.

Cutting expenses

Already, the network has proposed $140,000,000 in cuts to expenses such as administrative staff, clinician time and supply costs. Even with those aggressive cuts, the network still expects its spending to increase more than $97 million compared to this year.

One of the largest cuts to expenses comes from slashing non-clinical, administrative staff across the network — in areas like IT, human resources and legal departments. The network estimates the cuts will save $15 million.

The network also indicated it would use fewer traveling nurses — from 228 in 2025 and 173 this fiscal year to a proposed 114 for 2027. It’s a cut that is also expected to save nearly $15 million.

Similarly, the medical center said it’s trying to reduce overtime and urgent pay by better staffing departments according to patient volume, which should yield nearly $25 million in savings.

Judy Peck-Lee, the medical center’s chief financial officer, told regulators that the hospital’s emphasis is on moving care to lower-cost sites and reducing length of patient stays in the hospital.

It’s all part of a larger push to increase clinician productivity, which the hospital hopes can bring in higher revenues while also trying to decrease wait times for patients.

The Medical Group — a separate UVM Health body of more than 1,500 doctors and other clinicians who work across the network’s hospitals and clinics — is going through some of the biggest changes, Leffler told regulators.

As part of the new productivity focus, the network set a 36-hour standard minimum number of patient-facing hours per week. The network is also streamlining its scheduling processes and trying to better match patients’ needs with the right level of clinician, such as staffing an advanced practice nurse when one might be more appropriate than a doctor, Peck-Lee told regulators.

A spokesperson for the hospital said it’s “unclear at this time” if increasing productivity in this way will also result in higher revenues for the network, but it’s something they will continue to monitor.

Fine balance between revenue and expenses

Historically, the Green Mountain Care Board has focused primarily on how much money the hospital network makes, not how much it spends.

Last year’s intense focus on curbing hospital revenue pulled more than $200 million out of the networks’ hospitals’ budgets, according to a memo from an independent oversight group. The network did that by pulling down prices for commercial insurance payers and reducing the hospital price of drugs.

Those slashed costs meant that commercial insurers in Vermont — BlueCross BlueShield of Vermont and MVP — could keep their insurance premiums lower for consumers.

This coming year’s budget proposes no increase to what the hospital group charges commercial insurance — though the care board had originally asked them to reduce it by 1%.

Yet those cuts to revenue need to match cuts in the hospitals’ expenses in order for the network to break even. But neither the 2026 nor the proposed 2027 budgets strike that balance.

“We anticipate that we’ll end the year significantly in the red at UVM Medical Center and at (Central Vermont Medical Center). The reason is fairly straightforward,” the network’s Chief Financial Officer Rick Vincent told regulators Monday. “The revenue reductions have happened very quickly, and by contrast, our expense efforts are taking longer to implement.”

The care board, in approving hospital budgets, has a tricky balance to strike — to keep healthcare prices affordable for consumers while also keeping the hospital solvent.

“We want high quality and the best types of care, but that money comes from somewhere. The most clear (place) it comes from is either taxpayer dollars or paychecks,” Chris Whaley, a healthcare economist not connected to Vermont’s regulatory process, told VTDigger.

Still more reduction

The independent liaison group tracking UVM Health’s finances says that the hospital network still needs to cut an additional $50 million from its expenses this coming year to prevent the network from eating into reserves. Specifically, the liaison team suggested that those cuts come from supply chain costs, administrative costs and making its independent group of clinicians more efficient.

The spending proposed by the hospital group is still less aggressive than the goal of a 2.4% increase in expenses that the care board had set for UVMMC earlier this year, a number that aimed to set just enough room to keep pace with inflation.

Peck-Lee told regulators that UVMMC is trying to bring this figure down even further by negotiating cheaper contracts for medical and surgical supplies.

But the hospital has said that it doesn’t know exactly where those cuts might come from.

“We did not have those savings completely identified yet, which is why our budget has a negative margin,” Leffler told VTDigger. In the past, the hospital has patched budget holes like this with abstract, placeholder numbers, called “plugs.” This year, instead, its leaders wanted to wait to clarify the cuts more concretely.

“I really don’t like plugs because plugs don’t actually identify what you’re going to do,” Leffler said. “They just feel kind of like you’re kicking the can. So we were honest. We said we don’t have the full savings right now.”

Still, the network expects to have $136 million in reserves for 2027, enough for about 150 days cash on hand. UVM Medical Center maintains a stable A rating from Fitch.

Leffler acknowledged that a lot of that suggested $50 million in expense reductions comes down to staffing costs — which he said make up 65% of total expenses. Leffler said wants the hospital to “save every single dollar we can” from supply chain purchasing and clinician efficiency before resorting to layoffs, even if that means prolonged anxiety and uncertainty for many employees.

Jacob Berkowitz, the president of the UVMMC support staff union, expressed frustration that workers have been bearing the brunt of the expense cuts. He worries about a “culture of fear” where managers assign fewer staff to their floors, even before official guidance, and about staffing reductions based purely on data, not staff experience.

“If done correctly, it can be fine,” Berkowitz said. “But the issue comes … when staff input is not heeded.”

Yet, for all this change at the state’s largest healthcare provider, Vermonters still need to see change translate into tangible reductions in prices for services and insurance, Sam Peisch, who works for the Vermont Health Care Advocate, told VTDigger. He is still waiting to see those concrete figures.

“Sometimes the conversations around hospitals frame solvency as the be-all, end-all of sustainability,” he said. “Cutting expenses does not automatically make healthcare cheaper for Vermonters. It’s a starting line, but it’s not the finish.

In the coming weeks, the Green Mountain Care Board will hear budget proposals for the state’s remaining hospitals, before turning to deliberations in September and issuing its budget orders by Sept. 15.

This story was first published by VtDigger and is republished with permission as part of the Vermont Journalism Trust’s Community News Sharing Project.