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Big Budget Problems at SVMC

Bennington, Vermont - June 26, 2009

A difficult diagnosis at Southwestern Vermont Medical Center. Auditors uncovered a budget deficit of $17 million, which is projected to grow to $22 million by the time its fiscal year ends in September.

"Highly disturbing and intolerable," said Mark Novotny, interim CEO of the hospital. "We were confident there would be a problem; we didn't know it would be this large."

Novotny blamed outdated fiscal practices, inaccurate forecasts of Medicare and Medicaid payments, and a drop in the value of its pension fund for the deficit.

"It's our failure to project income accurately and the economy at the same time," he said. "All hospitals, us included, have investments we use the interest on to pay for things. At the same time, our operations failed in terms of income coming in, our investments had no income either."

SVMC isn't the only hospital facing challenges in this economy, but the Vermont Hospitals Association says it doesn't expect deficits like this to emerge at other facilities in the state."

"I don't anticipate these sort of challenges, issues, percolating up through other hospitals," said Michael del Trecco of the VHA. "I guess you can never say never, but I am optimistic that hospitals are really watching and managing what they can afford."

On Monday SVMC will have a new chief financial officer experienced in turning around hospitals in financial trouble. Novotny says there are no plans for rate increases or layoffs, but it's too soon to know for sure.

"I anticipate this taking a bit of time to sort through," he said. "There's a lot of waste in health care, there are systems we can improve our payments for the work we are already doing. It isn't necessarily about cuts in staff, and we would go there last."

And Novotny says the hospital's main priority remains patient care. He says that will not suffer while the hospital's finances are in recovery.

Kate Duffy - WCAX News