Lawmakers Try to Stop Deluge of Problems from Fletcher Allen

Author: Peter Faroni

Fletcher Allen Health Care in Burlington, host to the University of Vermont's College of Medicine and a major Vermont hospital, is under investigation for financial fraud. An internal investigation by the hospital determined that top administrators deliberately misled state regulators and the hospital's Board of Trustees about the scope and cost of the Renaissance Project, which includes major construction and upgrades of hospital facilities. The ensuing debate led to the dismissal of Fletcher Allen's management team, including former Chief Executive Officer William Boettcher, and the resignations of many members of the hospital's Board of Trustees.
Fletcher Allen's Renaissance Project involves construction of a new emergency room and outpatient surgery center and a cancer-treatment center. It also includes the expansion and upgrading of the diagnostic imaging space, birthing center, women's and children's healthcare center and the building of a new power plant, laboratories and classrooms. The Fletcher Allen Web site states that the Renaissance Project "promises to bring together patient care, education and research in a truly integrated health sciences campus, marking a renaissance for the academic medical center."
After gaining approval to go forward with construction in the winter of 2000, the project officially commenced in April 2001. The Renaissance Project was part of Fletcher Allen's long-term, master facilities plan, which called for renewing and adapting the hospital's physical resources to ensure its continued ability to provide high-quality, low-cost healthcare to the community. At 668,690 square feet, the construction is the largest and likely most scrutinized hospital project in state history.
Since the investigation, construction costs have more than doubled. Just a few weeks ago, Fletcher Allen's Interim Chief Executive Officer Edwin Colodny asked state regulators to approve a new permit for the expenditure of $356 million, marking a substantial increase from the previous $173 million construction budget. Investigators are looking into critics' charge that, before Colodny's arrival, hospital administrators hid the cost of the project because they feared state regulators wouldn't approve it.
According to Kenneth Fisher, interim chief financial officer, the hospital will pay for the Renaissance Project over 20 years, and the capital costs of the project will contribute a minor amount to increased healthcare costs. Fisher said that the hospital will need to boost its prices in 2005 when the new building opens and that the additional cost will amount to a price increase of two percent on top of the three to five percent annual increases expected from inflation.
Fletcher Allen executives reported this year that the hospital lost $4.9 million in the first quarter of its fiscal year. Colodny assessed that the hospital had expected to earn $4.9 million that quarter, putting the books nearly $10 million off where they should have been. The hospital's second-quarter performance also fell short. Costs, namely lawyer and consultant fees for investigations into Fletcher Allen's troubled expansion added to the financial burden.
Consequently, employees of Fletcher Allen have been warned of layoffs and changes in the medical center's operation. In a two-page letter dated April 3, Colodny outlined a bleak financial picture and the need to act quickly to return Fletcher Allen to more stable ground.
Colodny said that he couldn't specify how many jobs might be affected by the impending changes. The number "is not going to be huge," he said. Colodny stated that Fletcher Allen management is reviewing more than a dozen of its programs, including cardiology, finance, nursing and information services, and is looking for ways to lower costs and increase revenues. He maintained that nursing will not be affected by the employee cuts, and that the hospital will continue to recruit nurses to fill shortages in staffing.
Colodny estimated that layoffs would happen within weeks, though the hospital's program to review departments for money-saving possibilities could take six months. Some staff might be moved to new assignments. "Our objective will be to minimize this by finding solutions which improve the way in which we operate," Colodny wrote in his April 3 letter, referring to possible layoffs.
As an initial response to the Fletcher Allen situation, the Vermont House of Representatives has given preliminary approval to a sweeping bill that overhauls the way the state regulates hospital spending. Supporters of three bills under consideration said that the measures would help remedy working conditions behind a growing shortage of nurses willing to work in hospitals.
One legislative proposal would ban mandatory overtime for healthcare workers except in emergency situations. Another would require hospitals to submit an annual staffing plan to meet minimum nurse-to-patient ratios. A third piece of legislation, dubbed the Whistleblower Protection Act, would protect healthcare workers who report what they believed to be improper patient care.
On April 1, in a unanimous vote, the House approved a bill that supporters said would cut healthcare costs by improving the way the state oversees hospital spending. "When we look at the size of healthcare reform, it's a very large universe," the bill's primary sponsor, Rep. Anne Donahue (R-Northfield) told her fellow representatives, "and this bill attacks one small part."
The bill would implement a statewide plan for healthcare spending in Vermont, reform the certificate-of-need (CON) permit process used to control hospital spending on construction and equipment and try to reign in costs by informing consumers about the costs of their healthcare decisions.
The healthcare plan is designed to involve the community in the planning process, promoting a more financially transparent environment in hospitals by requiring them to make their costs and use of funds public.
One of the central elements of the legislation is reforming the CON process, which is designed to keep healthcare costs down by making sure any new hospital construction, equipment or service is truly needed before allowing hospitals to spend the money. The intent is to avoid an if-you-build-it- they-will-come structuring of healthcare and to avoid excess space and usage of facilities and programs, which can drive up insurance costs.
Experts say that since Fletcher Allen plays such a central role in Vermont's healthcare system - last year it grossed more than half of the total revenues from Vermont's 14 hospitals - the public should be aware of the way it spends funds.
Fletcher is the state's only tertiary care hospital, a high-tech facility that features the latest equipment and offers highly specialized care and surgery, such as neurosurgery and organ transplants. Furthermore, it is an academic medical center, associated with the University of Vermont's medical school and a center for medical research. Fletcher Allen is one of only 126 tertiary hospitals in the country.
As Vermont's main provider of comprehensive healthcare, Fletcher Allen aims to increase the hospital's capacity through the Renaissance Project. The additional patronage means that health insurers - and the state - will spend more on healthcare, resulting in higher insurance premiums as the insurance companies attempt to recover the costs.
The project will not only affect residents of Chittenden County, but could impact all Vermonters. Because many citizens are members of large insurance pools, such as state or school employees, or private insurance groups that use Fletcher Allen, they will pay more as well. Hospital representatives maintain, however, that the increased facilities will allow Fletcher Allen to remain competitive with other large hospitals in the region. "If you don't have access to services, what happens to the patients? Where do they go?" Fisher asked. "Does the patient stay in Vermont, or does the patient go to Dartmouth
, Boston, Albany? The dollars are being spent, but not in Vermont."
Fletcher Allen's reputation has, according to many, been altered by the persistent investigation. "I think that there are a lot of people at this point who hear the words 'Fletcher Allen' and they say, oh, what's wrong now?''' said Rep. Thomas Koch (R-Barre).
With additional regulation under consideration by state legislators, hospitals may find it necessary to make every effort to restore the community's faith in medical institutions. This concerns not only the successful completion of the Renaissance Project, but also the future of the hospital in general.