Major Vermont health care players in dispute over alleged overcharges

Blue Cross and Blue Shield of Vermont told a state regulator that the University of Vermont Medical Center has been overcharging it for the past two years, and is asking for a refund.

The alleged overpayments, from the state’s largest private insurer to the state’s largest hospital, took place in fiscal years 2022 and 2023, Blue Cross said, and added up to nearly $30 million.

Blue Cross “respectfully requests that the Board obtain the information it needs from UVMMC to test our position and then order UVMMC to return any overage to Blue Cross VT,” Rebecca Heintz, the insurer’s vice president and general counsel, wrote in an August 21 letter to the Green Mountain Care Board.

The University of Vermont Medical Center has strongly denied that it overcharged for health care.

“That assertion is false and entirely unsupported by the insufficient analysis Blue Cross VT submitted in support of its serious allegation,” the hospital said in an August 26 letter to the board signed by two UVMMC vice presidents, Eric Miller and Kelly Champney.

In Vermont, the prices that commercial insurers pay for hospital services are regulated by the Green Mountain Care Board. Each year, in a bid to keep care affordable for Vermont residents, the board places caps on how much each hospital in the state can raise prices for its services for the following fiscal year.

Prices paid by public insurers — Medicare, which covers older and disabled adults, and Medicaid, which covers low-income residents — are determined by separate processes. Those prices are generally much lower than those paid by commercial insurers, which means that hospitals often rely heavily on private insurers for their revenue.

The dueling letters offer unusual insight into the behind-the-scenes negotiations over Vermonters’ health care costs.

For fiscal year 2022, the Green Mountain Care Board initially allowed UVMMC to increase its charges by 6.05% from the previous year. Partway through the year, the board allowed an increase of another 2.5%.

For fiscal year 2023, the board approved a rate increase of 14.77% for the Burlington hospital.

But Blue Cross Blue Shield says that the hospital charged it even more than what was allowed under the board’s orders.

The insurer has “observed repeated multi-million dollar overages between UVMMC’s Board-ordered commercial rate increases and the actual increases we experienced,” Heintz wrote to the care board. “Those overages deplete our reserves and over time contribute to larger prospective increases in our premiums.”

Determining whether the hospital overcharged the insurer, as described by both parties, is a complex process.

For one thing, UVMMC does not hike prices for all services by the same amount each year. Some services could stay at the same price year-to-year, while others could increase by even more than the board’s price caps — as long as the aggregate prices don’t increase by more than the cap.

According to the medical center, those increases are tailored to adhere to another care board requirement: Each year, the board also places limits on how much total revenue hospitals can bring in from patient services.

That revenue can fluctuate depending on how many patients go to the hospital each year, and what services they use when they do.

In fact, in fiscal year 2023, UVMMC exceeded the revenue cap ordered by the care board by roughly $80 million, or 4.8%.

Hospitals administrators admitted that they brought in more money — and charged Blue Cross Blue Shield more — than expected. But they say those excesses came from the fact that the hospital treated more patients, and patients with more complicated needs, than predicted.

“We provided the services to Blue Cross members that they needed,” Champney, the University of Vermont Health Network vice president of managed care contracting, said in an interview.

“In ’22 and ’23 we saw more Blue Cross patients. We saw higher complexity of services for those patients,” Champney said. “And with that, the revenue from Blue Cross did increase. But we do not see an increase or incorrect application of the Green Mountain Care Board-approved rate we negotiated with Blue Cross.”

Blue Cross Blue Shield, however, said that the hospital’s charges don’t add up — even factoring in that more patients needed more complex services.

“We are accounting for that in our methodology,” Sara Teachout, a spokesperson for the insurer, said in an interview.

The dispute has become public just prior to a Green Mountain Care Board hearing Wednesday on UVMMC’s application for new rates for 2025 — a fact that UVMMC administrators raised concerns about.

“Having this letter that alleges a rather large overpayment, while we’re already under pressures to support our (2025) budget — it’s disappointing they went about it this way,” Champney said, saying the hospital would have preferred to negotiate more directly with the insurer. “And doing it, really, right before (the) Green Mountain Care Board hearing creates further complexities.”

The decision on how to handle the matter now falls to the Green Mountain Care Board. Owen Foster, the chair of the board, said in an interview that it was still too soon to tell what the regulator would do.

“We just received Blue Cross’s letter late last week, and UVM’s, I think last night,” he said. “And so we’re really very much still currently reviewing and evaluating their submissions. And once we get done evaluating the submissions, we’re going to reach out to the parties to further understand the issues.”

Read the story on VTDigger here: Major Vermont health care players in dispute over alleged overcharges .