VT approves $187M UVM Med Center building

The University of Vermont Medical Center has won approval for an $187 million construction project — but regulators imposed conditions that might delay construction.

Hospital leaders had hoped to break ground on the new seven-story inpatient building in Burlington as early as this summer.

Instead, the Green Mountain Care Board, which regulates health care in Vermont, will require the hospital to demonstrate financial viability through September 2016 before starting construction.

"The board has given a thoughtful review of the project, and we've got some work to do to meet the board's conditions," said Mike Noble, a spokesman for UVM Medical Center. The organization is carefully analyzing the conditions, Noble added.

In the formal green light for the project — known as a Certificate of Need — the Green Mountain Care Board agreed that the largest hospital in Vermont needs to replace outdated facilities with private single-patient rooms.

The building will hold 128 private rooms, but the total number of beds at the hospital will remain the same.

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UVM Medical Center has promised not to raise commercial rates or per diem room rates to finance the project. However, board members worried that hospital patients will bear the expense.

Regulators pointed out that a lot could change at the hospital and within Vermont's health care system from 2015 to 2038, when the hospital intends to begin paying the principal on its debt for the building.

"We therefore must also ... express our concern that a future hospital administration, faced with a financial picture substantially different than the one the Applicant now paints, may reasonably seek to remedy financial shortfalls through increased rates and charges," the Green Mountain Care Board wrote in a 4-1 decision Wednesday.

"To avoid this outcome, we impose conditions that mitigate risk, ensure that the Applicant's margin of error is a more comfortable one, and lessen the possibility that future shortfalls will result in increased commercial rates or other consumer charges."

The UVM Medical Center project is the largest ever reviewed by the Green Mountain Care Board in its two years of existence, and Chairman Al Gobeille said Wednesday was the first time the board has ever imposed financial conditions on a project.

Among the conditions, the hospital must provide regulators with an updated construction cost estimate, which cannot be more than 8 percent higher than the current estimate. Hospital administrators also will be required to show that their net patient revenue grows no more than 3.5 percent, and expenses grow no more than 2.8 percent, in the upcoming fiscal year.

UVM Medical Center is allowed to buy land from the university for $9.7 million and to proceed with construction drawings for the new building but cannot buy construction materials or break ground until the financial conditions are met.

Green Mountain Care Board member Allan Ramsay disagreed with some of the conditions, saying that they would cause unnecessary delays. Board member Cornelius Hogan wanted to reject the project entirely.

"Based on what I believe is a lack of convincing evidence that the Applicant can financially sustain this Project, I would deny a certificate of need for the construction of a new inpatient facility," Hogan wrote in dissent.

The hospital may request relief from the regulatory conditions through July 15, and any party may appeal the board's decision within 30 days.

Noble, the UVM Medical Center spokesman, said the hospital is developing a plan to address the board's conditions.

Read the approval documents and conditions below:

Note: The proposed inpatient building will contain 128 single-bed rooms. The number was incorrect in an earlier version of this article.

This article was first published online July 1, 2015. Contact April Burbank at 802-660-1863 or aburbank@freepressmedia.com. Follow her on Twitter at www.twitter.com/AprilBurbank