Sunil "Sunny" Eappen is the president and CEO of the University of Vermont Health Network. It’s the largest hospital system in Vermont, where health insurance premiums are among the highest in the country. We talk with Dr. Eappen about why that is, and the role hospitals play in setting health care costs. He also discusses how he’s thinking about the hospital system’s budget for the coming year.
The following transcript has been edited and condensed for clarity.
Mikaela Lefrak: Dr. Eappen, bear with me here for a second, because I'm going to set the stage for some of us who are newer to these issues. Last year, the Green Mountain Care Board — this big regulatory board in Vermont — ordered the University of Vermont Medical Center and Central Vermont Medical Center to cut revenue from seeing patients. And the GMBC also issued a penalty after the University of Vermont Medical Center got more revenue from patient care than it had expected. The hospital was ordered to reduce rates by 1%. Now, in a VTDigger op-ed published in December, you wrote that you "cannot simply lower prices to comply with budget orders without also cutting patient services." But looking at the budget submitted by the hospitals in your network for next year, it does seem like you are doing just that. You're lowering prices without cutting patient services. Commercial health insurance rates would be cut by 7.9% at UVM MC in Burlington and 3.3% at CVMC in Berlin. So what changed?
Sunny Eappen: I think it's a really great question. I think first of all, we've acknowledged and understand that we've got an affordability crisis in Vermont. So I think the idea of us recognizing that, and the idea of us totally committing to doing everything possible to make healthcare more affordable for Vermont owners and northern New Yorkers is priority number one. So I think understanding that and moving forward was a really big goal. The sequence of events that happened as a result of the FY23 overage that hit us in '25 was very, very rapid. And we had to make some decisions really quickly about how we were going to reduce our expenses. And I think if we had more time at that, in that in that time period, we would have done things differently. But we were presented quite rapidly to reduce our expenses, and we did what we thought we could manage across our our state which included, you're right, cutting some services that I think if we could go back, we'd say "was that the right thing to do or not?"
ML: Are you referring to the proposed cuts to dialysis in three towns?
SE: Yeah, I think we did a number of things. So the proposed cuts to dialysis were very deliberately done, because that was a space where we thought, and others in the regulatory space, I think, believed that others could do it more efficiently and less costly than we could. And so we were open to that, because we provide dialysis for many places. All of the places in Vermont including inside of three other hospitals. And so, those hospitals and their presidents were very interested in actually taking over dialysis in those places. So we said, look, if you can do it better than we can, and less costly than we can, we're open to that idea. And we said, we'll let go of that, and we brought that forward to our regulators. We told them about it in advance, and we moved it forward. Unfortunately, I think when those hospitals looked at that, they saw that it was going to cost them even more to do that, and this is with us giving them all of the equipment, the personnel, if they wanted it, to be able to do that. So I think we took that back, and we asked the Green Mountain Care Board for permission to be able to have the revenue, to be able to continue to run those services, even though we continue to lose money. Of course, doing that.
ML: So that happened. Those dialysis clinics are still open and being run by the Health Network. There were, though, also a number of cuts to patient services, like the closure of the inpatient psych unit at CVMC and primary care clinics in Waitsfield. Are those some of the reasons why the rates are now able to be lowered?
SE: I think that's part of it. I think when you look back on those closures again, were done very carefully and deliberately, looking at, are there alternatives to be able to get that care? And we knew that there were. We had gone down to Brattleboro, we had gone down to other places to say, "do you have the capacity to take care of those patients?" We looked at our emergency rooms, and quite frankly, as we look back on it, we have not seen an influx of those patients coming. We were worried that our emergency rooms would get loaded. That actually hasn't been the case again. These are the difficult types of decisions I think, that we are going to have to make for the greater good of the entire state and region. We're going to have to make some really difficult decisions. You highlighted Copley closing their birthing center — an incredibly unpopular decision in that community — but I understand the difficult decision that board and the hospital management had to make because for sustainability, they were continuing to lose money on a relatively low volume line of care. And so, they have to make these difficult decisions about the greater good of their community. In that in that area, and that made sense, and it was similar to when we were making those decisions. The big change, though, and I think you alluded to it, and I'll just own it, is that we took a longer, deeper look at how our organization has come together, and how we've continued to provide these non-clinical services that provide and support the clinical services. So if you remember, our organizations come together over the last 10 to 12 years, piece by piece, and those non-clinical services, these are things like HR, IT revenue cycle, if you can put your head around those. Those pieces came together piecemeal, and they were kind of bucketed on. And we challenged our leaders in those spaces to say, "if we were starting today, can you reimagine how we would deliver those services to our providers and to our employees?" And so that was the challenge that we put in. And a couple of things needed to happen. And sometimes necessity is the mother of invention. And the couple things that had to happen was that local control had to be given up a little bit in that space. And that's a challenge in Vermont, and we see it in our educational system, where our communities have to back up a little bit and say, "can we take a step back and lose a little bit of our autonomy in order for the greater good of the community that we're serving?"
ML: To be clear, are you talking about cutting administrative jobs?
SE: Cutting administrative services and jobs, yeah, jobs, positions. Looking at how we can do the work differently. If we look at it as a whole, instead of eight loosely federated partnerships, can we look at it as as one unified, integrated healthcare system? And if you could put that space to our HR and to our IT. Can we do it differently than we're doing it today? That was the challenge that was put out, and our leadership really answered. There are some difficult decisions that were made around how we're going to get there in FY 26.
ML: Like what?
SE: The difficult decisions that were made were — Let me give you a couple of tangible examples. I'm gonna make these up, but you'll get the idea. If you call HR today because you need something, maybe our turnaround time was 24 hours. Is 72 hours, okay? Is five days? Okay to do that, right? If you call in to book an appointment, is it okay if our call drop rate drops from 2% to 5% where we don't answer the phone quick enough, right? Those decisions, where we those are non clinical services, those are administrative services that we book, is, are those going to be acceptable to do that? And can we look at it as a whole? That was the different piece, like, instead of use the same example of the call center or HR, do we need to have somebody or people that sit in each one of our organizations, or can we centralize that function? Are you okay losing control of your HR person or your call center, and we move it to the center because we can get greater efficiency. We can do it with fewer resources in order to do that. And then we've also looked at how technology can help us, and we've moved some positions as a result of being able to better use technology for our compliance, for our billing. So we've done all of those together. We had greater time to do it, and we challenged our our non-clinical administrative services to do that, understanding that there is a price at the other end of that. Some of it, we'll see how it plays out. Some of it, we know that it's going to have these kinds of reductions in that space.
ML: According to the nonprofit, Vermont Healthcare 911, labor costs attributed to administration and management at UVM MC, in particular, are 73% higher than at more than 100 other academic medical centers across the country. You're discussing some of the ways to reduce those costs. Do you have data yet on the number of jobs that have been cut?
SE: Yes, so let me just take a couple of those things out. First of all, I really appreciate Vermont 911, and all of the different community groups that have come forward because we're aligned in the same goal; how do we deliver accessible, affordable care to our communities? And so we're aligned in that space. We may differ on the data and the sources of the data, and how you look at that, and so that's part of the challenge there with all these different groups. Vermont 911 is a great example of I have met personally with them three or four times. They have met with our data folks. Even more, they've met with our board and had positive meetings with our board. So I think, I think the important piece there is that we're committed to working together with anyone that wants to come forward and share in that space, even though we may have some disagreements at the end of that. So regardless, our goal is, how can we cut our administrative expenses and still maintain the clinical care services that we're delivering? And that's what we're trying to do. And I think we've, we've accomplished that as we move forward for FY26 we hope we'll find out as we go a budget is a plan, and we hope now we have to execute on that plan.
ML: Correct me if I'm wrong here, but one of the other changes that you've made for the for next year's budget is that executives won't receive any bonuses at the hospital. All the hospital systems are included in that. So that includes you.
SE: It does.
ML: Well in the last fiscal year, you received a $600,000 bonus in addition to your $1.3 million yearly salary. That was what you were recruited on, and that's a salary selected by the board. But I can imagine that lots of listeners hearing that and hearing about these financial struggles say, "hey, this guy's getting a $600,000 bonus. He accepted that bonus on top of his salary. What's up with that?"
SE: Yeah, so you're going back to last year, and I guess I changed the story a little bit — the narrative. So first of all, it's variable pay, and the way that our board sets our pay and what I was recruited for. And like I said, I didn't actually negotiate the salary. That was a salary that was given. We have the goal, our board has the goal to reach the 50th percentile. They take a chunk of that salary. They call it variable pay, and say, "for you to be able to reach the 50th percentile, roughly —"
ML: Of other people who have similar jobs with similar organizations and similar places...
SE: Similar size and complexity. The goal is to reach the 50th. If you get 100% of your variable pay, you'll be able to do that. And so that is the structure of our system, as it is for 90% of healthcare systems in the country. And so yes, because in FY24 we had a successful year, we met the mark, I did receive the variable pay to reach close to it was at the 45th percentile of our goal. This year, because of the affordability piece, us as a management team came back and said, "hey, let's not go down this path that was clearly very unpopular, and it didn't feel like we were sending the right message to our community in that space." And the board, which ultimately makes those decisions, came back and said, "we're going to hold on variable pay. And that impacts the top 300, 350 of our employees in the state. It's a challenge, because when you're trying to recruit very good people, and you say that we are not going to have that as part of our compensation, it hurts us in our ability to recruit folks. And that's that's part of the challenge that we're balancing in that space, because we want to do the very best for our community and our patients, and so it has an impact.
ML: Speaking of pay, we just got a question from a listener named Mike who identifies themselves as a nurse in the area, and says, "I love Vermont and I don't want to leave, but I'm planning on leaving because I can get paid more at hospitals in other New England states. As you cut costs, how are you going to pay competitive salaries for nurses to attract and keep nurses and other healthcare workers here?"
SE: Our nurses actually have a very competitive salary, and we're proud of the fact that we actually probably offer them somewhere in the 65th to 75th percentile pay overall in the region. And so our retention rate for our nurses has never been better. I'm talking about pre-COVID numbers. And I think part of that is both the culture that we've created there, where we really value our nurses, and paying them that competitive salary. And that's been evidenced by the drop in our travelers as a result of that of that retention. So I hope that person will reconsider and come look at our one of our roles we have. We still have plenty of roles in our nursing space, but it is a real challenge for us because we have an expense cap, and we know that if we need to be able to have really good nurses, not just nurses, but surgical techs, radiology techs, you name it, we have to pay competitively in this marketplace to be able to do it. And at the same time, that increases healthcare costs. And so that's the balance that we have.
ML: The last time you were on Vermont Edition, Dr. Eappen, it was March of last year, and we spoke extensively about the struggle to hire qualified healthcare workers in a number of different sectors, in the hospitals at the UVM Health Network. Are you still struggling to hire for certain jobs?
SE: We are. We're still struggling. I would say that in the provider space, we have worked really hard during that time. From last year through now we've done a lot better in our clinical space, both with physicians, nurse practitioners, and PAs Northern New York. And in Vermont, as an example, I think we have about 150 new providers that we've hired that'll start in FY26 so far, we're still working on it. And last year, all of last year, we about hired about 115. So we're doing a lot better in that space, and we need to continue to do that. Part of that is a little bit of a shift where we are going to rely more on physician assistants and nurse practitioners more than physicians. We want everyone to work at the top of their license. And again, this goes back to that creativity around we have to do things differently, and this is one of the places that we have opportunities to do things differently.
ML: We have Ellie calling in from Middlebury with a question for Dr. Eappen. Ellie, go ahead.
Ellie: Hi, Dr. Eappen. My name is Ellie. My question is, why has the UVM Health Network, which you oversee, been one of the most profitable 340B programs in the country, especially when considering that revenue is generated from high price markups on infused prescription drugs, which are used to treat cancers?
SE: Ellie, thank you for your question. So the 340B program — If you remember, the whole goal is that it gives federal permission to buy drugs at a certain price and then sell them at the market price, and we do exactly that, and then take those dollars and put them right back into our Medicaid patient population, our low income patient population. That's the purpose of that program, and that's what we exactly use it for. And so a number of valuable services, including allowing folks to purchase medications that they wouldn't be able to otherwise afford, and get the care at home. Sometimes a visiting nurse, all of those things that are we are able to do with those dollars go right back in. So I think it's really important that our listeners appreciate that when we make a margin, when we make a profit, it goes right back into our patients, our communities and our employees, so we can continue to deliver care equitably across all of our sites. So thanks for the question.
ML: I'm glad you brought up the low income patients that the UVM Health Network's hospitals see Medicaid and Medicare account for about two thirds of your revenue, and they pay a set amount regardless and the federal government pays a set amount regardless of your set prices for care. So I'm curious to hear from you how you've been thinking about President Trump's tax and spending law, the so called one big, beautiful bill, act now at law, which he signed earlier this month, which includes about a trillion dollars in cuts to Medicaid, not immediately, but over the next decade, as it's currently planned out.
SE: Yeah, so it's definitely gonna have a huge impact, both here in Vermont and in New York. You know, it's early for us to tell, but we estimate that about 45,000 patients in Vermont will lose their medical insurance. Probably about a million and a half in New York will lose their medical insurance as a result of it. The quickest impact that we're going to see is in 2026 actually. Because of the ability to the expansion of the Affordable Care Act, where people were able to get funds from the federal government in order to buy insurance on the exchange, that expansion is going to go away. So some people who are working will make deliberate decisions not to participate and buy insurance. That's where we're going to see the quickest impact. The reality is, all of our hospitals in Vermont continue to take care of everyone that shows up. It doesn't matter when they show up, the patients that lose that insurance will still need healthcare, and so we will continue to provide it. Unfortunately, we will provide it at the most expensive place, which is the emergency room and in the hospital, because they will not be able to see the providers outside of that space because they don't have insurance. And so they'll come in later in that stage of the disease, and so it'll be more costly, more dangerous for them. This is unfortunate. We've worked hard. We worked hard before the bill was passed, with our colleagues from Dartmouth and Maine Health, where we partner quite frequently, but we were down in D.C. talking to every senator and Congressperson that would listen to us. We certainly hit all of our delegations in that space because we know what the impact is going to be to to our patients all over the country and particularly in our areas.
ML: And you hit a bit upon my next question, which was going to be about the impact of having more people going to emergency rooms who don't have insurance. Now, previously in Vermont and specifically at UVM Medical Center in Burlington, there have been very long wait times at the E.R. already, and it's just simply not an efficient way to get care no matter wait. How you shake it. I'm curious if the those wait times have improved at the E.R., before all of these federal changes are going to hit.
SE: I'll have to get back to you on the details. But overall, our wait times have improved. And the biggest reason for that improvement is actually the movement of our patients from our inpatient floors out. And so we've had a concerted efforts in all of our hospitals on that length of stay work. Which is, how do you move patients out from the hospital when they don't need hospital care anymore? The challenge there, of course, is that our nursing homes are the numbers have gone down the beds that we manage. We've been working really hard to be as efficient as we can. And so we've seen a decrease in that length of stay across our system and at UVMMC, and as a result of that, patients are moving more rapidly from the emergency room up when they need to get admitted. But certainly, I think the challenge here is that as more patients come in because they're not getting the care on the outpatient side, there will be greater weights in all of our emergency rooms across the state.
ML: So last year, the University of Vermont Medical Center said it was going to reduce that number of patients who are admitted overnight from 450 patients to 400 Do you know if that's happened?
SE: Our census, our inpatient census, has dropped by about 40 beds. So I don't think we've quite at the 50, but we've we've dropped by about 40, and the goal is to continue to bring that down.
ML: I want to ask you about a different kind of bed space, and that is housing. Now, UVM Health Network has kind of moved into the real estate development space just a bit last time you were on last March on Vermont Edition, we spoke about your partnership with local developers to build housing for employees, to help attract a workforce, which we were talking about before the break, you told us that you opened 60 apartment units in South Burlington in 2023 and you had plans to open another 150 along with childcare spaces. Last year, there were also plans to build more housing in Central Vermont and in Northern New York. Where do those plans stand now?
SE: Great question. So we've gone up to about 180 units in South Burlington with 80 child care spots that have actually opened up. They're open and active right now. So the child care spots are for from three months to preschool. We'll cover them and those are filled, and there's a waiting list for all of those. We have one more building that we're already in the planning stages in South Burlington with our developer partners, and we are looking at Central Vermont as well. We've started the conversations to see if there's an opportunity to partner for there. I think we would need to partner with more than just our hospital and then developer we would need a couple of other partnerships to come with us and work together in that space, to come together. Because the development plan in Central Vermont is a little bit bigger than we can handle. We've done all of those in partnership. It's a drop in the bucket, I would say, 18 to 20 housing units. But it's been incredibly helpful for our employees. The goal there is for employees to come in and live there for a year and find a place or two years if they need to extend it out, and then have that cycle. So that gives people an opportunity to see the neighborhood, understand it, and then keep looking while they do that. That's been very successful. There's a waiting list for those positions. We've subsidized the housing as at a little higher rate than Vermont would recommend, depending on the income level, to encourage a wide and diverse group of people to live in there. It's been very successful. Quite frankly, we need housing in general. You remember, I probably brought brought this up last time I was here, but our regulators and our HS had gone out and got a consulting company to look at healthcare and what our healthcare needs are in Vermont and what we need to do. The number one thing they came back with for healthcare was to get more housing. And so we know that what we need is the infrastructure here that would make the biggest difference for healthcare in Vermont is economic development. Economic growth. That's what would drive lower cost, more efficient healthcare.
ML: So is that something that you spoke about lobbying on Capitol Hill earlier? Have you also been working with state legislators or the governor about housing locally?
SE: Very much. Everywhere I go, I would say, "what can we do to grow and develop businesses in Vermont?" Because what we need are working people that come into the state and contribute to our health care insurance plan. So when I say working people, it's 20 to 60, right? People that are working and contributing to our commercial insurance plans —
ML: That might have lower pre-existing conditions or healthier —
SE: Yeah, the healthier working population is going to have lower typically, is going to have a lower cost, right? And you want that insurance pool to be as big as we possibly can have it. Because that's what lowers risk and lowers cost for us. The challenge that we have here is that we have a very small state and a small state that whose population hasn't changed other than getting older over the last 20, 30, even 40 years. Probably that's particularly challenging in healthcare.
ML: Let's shift focus a bit towards medical research, which is a big point of focus at UVM Medical Center and other places as part of the Health Network. Have federal funding cuts affected medical research at UVMMC? can you describe that landscape for us now?
SE: Sure. So the big change that happened in federally funded research is the indirect rate, and so typically, when you get $100 it comes with another 40 or 50% another $40 to $50 to cover your infrastructure costs, electricity, building, lab supplies, etc. To do that, what the federal government has said is that they're going to do is drop that down to 15%. That may not sound like a big deal, but it's a really big deal for research institutions. It hasn't changed this year because of a group of states, including Vermont that has fought that, but it will probably change in the future. And so what UVM and UVMMC has done is frozen those positions. So we're not going to add more until we know what's going to happen there that will have an impact as it moves forward in medical research and the infrastructure behind it, which is like research assistants, PhD students, master students that are doing that work today. It hasn't had significant impact yet, because most of the grants have come through. A few of them have not. They've already been pulled back, and that has had impact to folks, but not yet.
ML: Let's take another caller. We have Jim calling in from New Haven. Jim, you're on the air. Go ahead.
Jim: Thank you. Hi, Dr. Eappen. I have a question. You had mentioned that nurses are being paid competitive salaries regionally. I'm curious as to as to what the comparisons are there. That's the first part of the question. The second part is that when you were asked about your administrative salaries, and you said that the board is benchmark marking them to the 15th percentile, and your salary was $600,000 bonus, plus your $1.3 million salary. That's a little excessive, even for that. Is the is that based on national or regional benchmarks? So the brief question is, are nurses salaries based on regional comparisons and the administration based on national comparisons?
SE: So let me go back one step and say our salaries are based and set by our community board, which works with an outside consultant. That outside consultant brings in both national and northeast specific benchmarks to put the comparisons in. And they do that both for the nursing as well for the administrative expenses. And I just want to, just want to, just want to make sure it was 50th percentile, not 15th. I don't want to miss speak there. So the goal is, for us on the administrative side, is to reach the 50th percentile on average. And I can tell you that we haven't reached that. And I know the salaries sound really high, but that is the competitive marketplace that's out there. If we want to recruit and attract really good people to serve Vermonters, we need to pay at that for our nurses. We've had to go a little bit higher than that. Again, that's northeast benchmarking that we use, because it's been incredibly competitive. And we want to get really good nurses, and we want the nurses that are committed to working here and staying here. So in the challenging space of where housing is difficult, childcare is difficult, we've had to pay a little bit more to get that, but we know that also, on the other side, increases healthcare costs. Thanks for your question, Jim.
ML: Jim, thank you for calling in. Now, you have the hospitals in your health network have submitted their budgets. The Green Mountain Care Board is reviewing them, and they'll get back to you all in sometime in August with what they think. Now, there have been tensions between the UVM Health Network and the Green Mountain Care Board in the past on how to reduce costs for Vermonters overall. It's a common goal with many different stakeholders and strategies. How would you characterize the health network the administration's current relationship with leadership at the Green Mountain Care Board?
SE: What we realize, and I realize in particular, is that we have the same goal. Our regulators are trying to do the same thing that we are, which is, how do we deliver high quality, equitable care that's accessible and affordable to everyone in Vermont? And so having that common goal, I think, helps us a lot right now. I don't think our relationship could be any better, in a way. And I'll explain that a little bit. We have a management group that's made up of two of the Green Mountain Care Board members and two of our board members, one from University of Vermont Medical Center, and one from the network who are working together to look at expenses inside of the organization. They have unfettered and full access to whatever data they need and that want to look at in order to help us to find opportunities to cut expenses. I am a total advocate in that space. If there are opportunities for us to do better in the way that we can reduce costs and serve Vermont, we want to be there. And so we're really actively working in that space. We also have a liaison who's inside of our organization who's able to look even beyond that, more broadly, for opportunities for us to save expenses. And I've worked very closely with him as well. So in a lot of ways, I don't think it's been better in a long, long, long time. I think there's always going to be a little bit of tension between a regulator and the regulated. It's probably a healthy tension, from my point of view. I think it makes us as efficient and as lean as possible. And I think the challenges is really agreeing upon the data sources. That's been the biggest challenge that I've seen since I've gotten here. And I think we're actually making progress in this management group that's working with us in that space. Is the whole goal is to actually agree upon that. So I think we're gonna get really far along in that space, it'll probably take us a year, and so we'll see the benefit of that in FY27 probably more than in FY26. But I think it's all positive.
Broadcast live on Tuesday July 15, 2025, at noon; rebroadcast at 7 p.m.
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