Miller Building at the University of Vermont Medical Center in Burlington on Monday, Nov. 23, 2020. Photo by Glenn Russell/VTDigger
Blue Cross Blue Shield of Vermont has told state regulators that it is seeking refunds after the University of Vermont Medical Center overcharged it over the past two years.
The alleged overpayments from the state's largest private insurer to the state's largest hospital occurred in fiscal years 2022 and 2023 and total about $30 million, according to Blue Cross.
“Blue Cross respectfully requests that the board obtain the necessary information from UVMMC, verify our position, and order UVMMC to return the excess payments to Blue Cross VT,” Rebecca Heintz, the insurer's vice president and general counsel, wrote in an Aug. 21 letter to the Green Mountain Care board.
The University of Vermont Medical Center strongly denies that it overcharged patients.
“The allegations are false and completely unsupported by the inadequate analysis Blue Cross VT submitted in support of its serious allegations,” the hospital said in an Aug. 26 letter to the board of trustees signed by UVMMC vice presidents Eric Miller and Kelly Champney.
In Vermont, the prices private insurers pay for hospital services are regulated by the Green Mountain Care Commission. Each year, to ensure that health care is affordable for Vermonters, the commission sets a cap on how much each hospital in the state can increase its fees for services in the following year.
The prices paid by public insurers (Medicare, which covers the elderly and disabled, and Medicaid, which covers low-income people) are determined through separate processes. These prices are generally much lower than those paid by private insurers, which often rely heavily on hospitals for revenue.
The conflicting letters offer a rare insight into behind-the-scenes negotiations over health care costs for Vermonters.
For fiscal year 2022, the Green Mountain Care Board initially authorized UVMMC to increase rates by 6.05% over the previous year. Midway through the fiscal year, the board authorized an additional 2.5% increase.
The board approved a 14.77% rate increase for Burlington Hospital in fiscal year 2023.
But Blue Cross Blue Shield argues that the hospitals charged even more than the commission's order allows.
“Insurers have seen multiple multi-million dollar overages between commercial rate increases mandated by UVMMC's board of directors and the increases actually experienced,” Heinz wrote to the care committee. “These overages will deplete our reserves and could lead to significant premium increases over time.”
As both sides contend, determining whether a hospital overbilled an insurer is a complicated process.
First, UVMMC does not increase the price of all services by the same amount each year: Some services remain the same price each year, while others may increase beyond the Commission’s price cap, so long as the total price does not increase beyond the cap.
The medical center said those increases were adjusted to comply with another requirement from the Health Care Commission, which also limits the total revenue hospitals can earn from patient services each year.
Revenues vary depending on how many patients visit the hospital each year and what services they use during those visits.
In fact, in fiscal year 2023, UVMMC exceeded the revenue cap mandated by the Care Commission by roughly $80 million, or 4.8%.
Hospital administrators have acknowledged that they made more money than they expected and overbilled Blue Cross Blue Shield, but they argue that the excess stemmed from the fact that the hospital treated more patients than expected, and those with more complex needs.
“We provided a needed service to Blue Cross members,” Champney, vice president of managed care contracting for the University of Vermont Health Network, said in an interview.
“We've had more Blue Cross patients in '22 and '23. The complexity of services to those patients has increased,” Champney said. “And with that, our revenue from Blue Cross has increased. But we've not seen any increases or misapplication of the Green Mountain Care Board-approved fees that we negotiated with Blue Cross.”
But Blue Cross Blue Shield said hospitals' charges don't match up to the fact that more patients need more complex services.
“We've built that into our methodology,” Sarah Teachout, a spokeswoman for the insurer, said in an interview.
The controversy became public just before a Wednesday Green Mountain Cares committee hearing on UVMMC's new rate application for 2025, a fact that has concerned UVMMC administrators.
“It's unfortunate that they have acted this way after receiving this letter alleging a fairly significant overpayment at a time when there is already pressure to support the (2025) budget,” Champney said, adding that the hospital would have preferred to negotiate more directly with the insurer, “and doing so right before the Green Mountain Care committee hearing just creates an even more complicated situation.”
The decision on how to handle the issue rests with the Green Mountain Conservation Commission, whose chairman, Owen Foster, said in an interview that it is too early to tell how regulators will respond.
“We received the letter from Blue Cross last weekend and the letter from UVM just last night,” he said. “We are still reviewing and evaluating their filings. Once we have finished evaluating the filings, we will be reaching out to the parties to further understand the issues.”
