UVM Health Says It Is Losing Money. Its Own Filings Tell a More Complicated Story.

Part 1 explained why Vermont's hospital budget review matters to patients, workers and businesses. Part 2 looks at the state's largest health system and what its own numbers say about its financial condition.

University of Vermont Health is asking state regulators to approve a fiscal year 2027 budget built around operating losses, weak clinical productivity and a promise that years of difficult restructuring are beginning to produce results.

Some of that case is supported by the numbers.

The numbers also make the story considerably more complicated.

An operating loss is not the whole bottom line

The UVM Health FY2027 presentation budgets a systemwide operating loss of approximately $14.7 million for fiscal 2027.

The independent UVM Health Liaison Team memorandum provides the fuller income statement.

It shows UVM Health projecting a $25.7 million operating loss in fiscal 2026, approximately $58 million worse than budget.

After nonoperating revenue is included, however, the system projects an excess of revenues over expenses of positive $105.2 million. For fiscal 2027, that bottom-line figure is budgeted at positive $36.1 million.

Those are different measures, and both matter.

The operating loss describes whether ordinary operations cover ordinary expenses. The final excess of revenues over expenses also includes nonoperating revenue.

The difference becomes especially important when the system is described simply as "losing money."

Pharmacy props up operations — it does not create the positive bottom line

UVM Health's fiscal 2026 operating result received a major boost from pharmacy-related revenue.

The Liaison Team found that Other Revenue exceeded budget by $129.8 million, with approximately 95% of that favorable variance coming from retail and contract 340B pharmacy revenue.

That revenue is already included in operating results.

In other words, UVM Health still projects a $25.7 million operating loss despite receiving nearly $130 million more Other Revenue than budgeted.

Retail pharmacy also carries substantial associated drug expense, and the Liaison Team recommends excluding retail pharmacy from the hospital expense-growth benchmark. But the size of the revenue variance shows how heavily pharmacy activity affects the operating statement.

The final bottom line is rescued elsewhere.

UVM Health budgeted $45.4 million in nonoperating revenue for fiscal 2026 but now projects $130.9 million. For fiscal 2027, it again budgets a substantially lower figure: $50.5 million, a 61.4% decline from the current fiscal 2026 projection.

That explains an apparent contradiction in the budget.

UVM Health expects its operating loss to improve, from $25.7 million to about $14.4 million, while its final excess of revenues over expenses drops from a projected $105.2 million to $36.1 million.

(The Liaison Team's figures are restated onto a basis consistent with UVM Health's audit, which is why its fiscal 2027 operating loss of $14.4 million differs slightly from the $14.7 million shown in the system's own presentation.)

The difference is largely the assumption that nonoperating revenue will fall sharply.

The Liaison Team separately warns that UVM Health has historically underestimated other operating and nonoperating revenue in its budgets.

The Medical Group changes the picture again

The larger structural issue is UVM Health's physician organization.

According to the Liaison Team, the UVM Health Medical Group lost approximately $279.9 million in fiscal 2025, is projected to lose $321 million in 2026, and budgets another $320 million loss in 2027.

The team says those losses are offset in part by higher outpatient and ancillary prices charged to Vermonters.

Separating hospital operations from Medical Group operations changes the picture substantially.

At UVM Medical Center, the hospital operation itself budgets roughly $124 million in operating profit, while its Medical Group budgets a loss of approximately $167 million, leaving UVMMC with a net operating loss of about $43 million.

Porter's hospital operation budgets roughly $34 million in operating gain, offset by approximately $22 million in Medical Group losses.

At Central Vermont Medical Center, the hospital operation is estimated at roughly $36 million in operating profit, while its Medical Group loses approximately $39.7 million.

Medical groups commonly operate at losses inside larger health systems, and UVM Health's academic mission provides specialty care, physician training and a workforce pipeline for Vermont.

But the scale of that subsidy matters when regulators are deciding how much commercially insured Vermonters should pay.

Productivity remains part of the problem

UVM Health acknowledges weak clinical productivity.

Its presentation says total work RVUs are growing, while labeling work RVUs per clinician FTE as "holding steady."

The per-clinician series shown on the slide moves from 4,850 to 4,734 over the period displayed, with the fiscal 2027 budget still below the fiscal 2026 budget.

The Liaison Team is more direct: UVM Health has budgeted clinical productivity 1.7% below its fiscal 2026 budget.

The team also reports primary-care providers seeing roughly 10 to 15 patients a day, compared with a typical 20 to 25, contributing to waits of 31 days for established patients and 33 days for new patients.

Last year's $45 million lesson

The Liaison Team credits UVM Health leadership with being more candid this year, saying it received fuller access to information and saw "no effort to spin" what it was given.

Its concern is execution.

UVM Health's fiscal 2026 non-salary operating expenses ran approximately $197.5 million over budget.

Included in that miss was a roughly $45 million expense-reduction "plug" inserted after the Green Mountain Care Board reduced the prior year's budget. The Liaison Team says management was unable to achieve the assumed savings.

UVM Health declined to insert unvetted savings plugs into the fiscal 2027 budget.

That makes the budget look worse on paper, but arguably makes it more credible.

The Liaison Team nevertheless recommends UVM Health reduce fiscal 2027 expenses by at least another $50 million beyond what is currently budgeted, particularly at UVMMC, through supply-chain, administrative and Medical Group efficiencies.

New York enters the Vermont rate calculation

One less obvious system issue crosses Lake Champlain.

UVM Health's filing shows its New York partners owing UVMMC and the system approximately $105.6 million in fiscal 2027.

Because UVMMC does not meet the GMCB benchmark of zero dollars due from out-of-state affiliates, 20% of that balance — approximately $21.1 million — is incorporated into UVMMC's Vermont commercial-rate calculation as a penalty.

The fiscal 2027 budget assumes no reduction in the underlying balance.

That does not establish wrongdoing.

It does raise an obvious question for Vermont employers and policyholders: why should financial balances involving New York affiliates affect the calculation of Vermont commercial hospital rates?

UVMMC has already taken a real rate cut

UVM Medical Center also has one of the strongest affordability arguments in the filings.

Effective January 1, 2026, UVMMC negotiated a 12.3% commercial rate reduction with BlueCross BlueShield of Vermont, according to its FY2027 presentation.

The hospital reports reductions of 13.5% for outpatient labs, 16.7% for outpatient surgery, 20% for other outpatient services, and 25% for imaging, colonoscopy and physical therapy. It also returned a $12 million BCBSVT settlement, while legislation reducing provider-administered drug prices removed another $103.6 million.

That is why UVMMC argues its proposed 0% fiscal 2027 commercial rate increase, although above the Board's requested 1% reduction, satisfies the intent of the guidance.

On commercial net patient revenue, UVMMC does comply.

The harder issue is expense growth: 8.4% unadjusted against the Board's 2.4% benchmark, falling to lower percentages as retail pharmacy, depreciation, taxes, grants and certain pharmaceutical costs are excluded.

Some exclusions are legitimate. The Liaison Team expressly endorses the retail-pharmacy adjustment.

The question facing the Board is therefore not whether UVM Health has become more transparent. It has.

The question is whether transparency has been matched by enough operational change to justify what Vermonters are still being asked to pay.