BRATTLEBORO — The Brattleboro Retreat “is facing significant financial challenges that without redirection could lead to insolvency.”
That was the conclusion of the Green Mountain Care Board (GMCB), which last week released its analysis of the hospital's audited financial statements spanning three fiscal years, from 2015 to 2018.
The report was issued to comply with Act 53, a 2019 law extending the purview of the six-member GMCB with “limited budget oversight of each psychiatric hospital in the state,” according to the document, issued to the Legislature Jan. 9.
The GMCB was created in 2011 by the Legislature as part of the state's health-care reform efforts under then-Gov. Peter Shumlin. It is charged with “working to ensure that our health care system provides quality, affordable health care to all Vermonters while reducing waste and controlling costs,” according to its website.
The GMCB stated that the Retreat “has been under sustained financial duress with cumulative net operating losses since FY 2015 totaling $4.7 million” and that those losses “are not sustainable from an operating perspective.”
According to data from the FY 2018 balance sheet, the Retreat had $24.5 million in net assets, including $5.3 million from the state that was restricted for adding 12 new psych beds.
The Retreat had $72.7 million in total revenues in FY 2018 and $74 million of total expenses. Its payer mix that fiscal year consisted of Medicaid (37 percent), Medicare (28 percent), commercial insurance (27 percent), and other third parties (5 percent).
Over the fiscal years that were reviewed by the GMCB, the percentage of Medicaid patients steadily increased, from 28 percent in FY 2015 to 37 percent in FY 2018, while commercial and third-party payments both declined.
As a result, the GMCB found that the Retreat's operating expenses “are outpacing its operating revenues resulting in sizable financial losses that are not being subsidized by non-operating income. Reserves are being utilized to cover the losses, resulting in a financially weakened organization.”
Also, the board found that the Retreat's uncollectible accounts “are growing at an unsustainable rate.”
“As of FY 2018, the allowance for uncollectible accounts consist of 39 percent of gross accounts receivable, up from 17 percent as of FY 2015,” the board wrote.
The board also raised concerns about the Retreat's ability to service its long-term debt and whether it had resources necessary to keep up with needed capital improvements to maintain its aging infrastructure.
“Furthermore, with the average age of plant in excess of 20 years and sustained losses of this nature, the entity does not have the capacity to build up reserves to make necessary capital improvements,” the GMCB cautioned. “In the near-term it is likely that they are deferring maintenance and will continue to face rising costs to maintain an aging infrastructure, making the eventual capital improvements even more expensive.”
Since the Retreat's fiscal year runs January to December, the final FY 2019 totals are still being compiled. But the GMCB made it clear in its report that if the 2019 numbers are on par with 2018's, “the Retreat may need to seek alternative solutions to remain in operation.”