General Standards and Annual Guidance Suffice for Vermont Hospital Budget Oversight; No Per‑Capita Mandate Under 18 V.S.A. § 9372

Introduction

This commentary examines the Vermont Supreme Court’s decision in In re Central Vermont Medical Center Fiscal Year 2025, 2025 VT 53 (Sept. 12, 2025). Central Vermont Medical Center, Inc. (CVMC), joined by the University of Vermont Medical Center, Inc., appealed the Green Mountain Care Board’s (the Board) modification of CVMC’s Fiscal Year 2025 (FY25) hospital budget. The Board had reduced CVMC’s requested net patient revenue (NPR) and commercial negotiated rate growth to align more closely with statewide affordability benchmarks, concluding that CVMC had not justified its above‑benchmark requests.

On appeal, CVMC advanced three primary challenges:

That the Board exercised “unfettered discretion,” resulting in an arbitrary and capricious order;
That the Board failed to disclose standards in advance, violating procedural due process; and
That the Board was required to regulate hospital revenue on a per‑capita basis under 18 V.S.A. § 9372(2) and failed to do so.

The Court affirmed the Board’s decision in full, clarifying the governing standards for the Board’s hospital budget review, the sufficiency of general standards and annual guidance to satisfy due process, and the non‑mandatory character of the per‑capita “purpose” provision in § 9372.

Summary of the Opinion

The Board’s decision is entitled to strong deference; reversal requires clear and convincing evidence of error.
Vermont’s hospital budget review is governed by statute (notably 18 V.S.A. § 9456), principles of health care reform (§ 9371), the Board’s rules (GMCB Rule 3.000), and annually issued guidance and benchmarks.
For FY25, the Board set benchmarks of 3.5% NPR growth (aligned with the All‑Payer Model total cost of care growth target) and 3.4% commercial negotiated rate growth.
CVMC requested 11.9% NPR growth and a 5.5% commercial rate increase, which the Board reduced to not more than 6% NPR growth and 3.4% commercial rate growth, respectively.
The Court held that the Board’s standards were adequate and not “unfettered”: general, flexible standards are permissible given the field’s complexity, and annual guidance provided clear expectations.
Due process was satisfied: hospitals had notice through the statutory scheme, rules, and FY25 Guidance, and CVMC received a meaningful opportunity to be heard.
Section 9372(2) (purpose to reduce per‑capita expenditure growth) does not mandate per‑capita regulation in each budget decision; the Board properly proceeded under § 9456 and the § 9371 principles.

Analysis

Statutory and Regulatory Framework and FY25 Guidance

The decision rests on a layered framework:

18 V.S.A. § 9456: Directs the Board to review and establish hospital budgets, listing factors to consider and authorizing adjustments.
18 V.S.A. § 9371: Establishes the principles of health care reform (e.g., access, affordability, quality) to guide the Board’s duties.
18 V.S.A. § 9375: Charges the Board with executing its duties consistent with § 9371.
GMCB Rule 3.000:
- § 3.202: Annual benchmarks and guidance issued by March 31 to inform hospital budget submissions.
- § 3.303 and § 3.305: Compliance with benchmarks guides review; the Board may adjust proposed budgets that do not meet benchmarks.
- § 3.306(a): The hospital bears the burden of justifying its proposed budget.

In March 2024, the Board issued FY25 Guidance setting:

An NPR growth benchmark of 3.5% over FY24 (aligned with the All‑Payer Model total cost of care target).
A commercial negotiated rate growth benchmark of 3.4%.

Hospitals exceeding these benchmarks were required to justify their requests with “credible and sufficient supporting evidence.” For NPR, hospitals needed to show that “excessive growth reflects an improvement in access or quality of care,” offering examples such as reduced wait times or demographic trends supporting volume increases. For commercial rate increases, hospitals were to provide “sufficient and credible evidence of hospital efficiency and maximized productivity,” with examples including departmental work RVUs per clinical FTE and comparative efficiency metrics.

The Guidance also identified key measures and data sources (e.g., revenue trends, operating efficiency, financial health, contextual community need) and explained that comparative analyses might be used, without fixed benchmarks for those comparative metrics given their hospital‑specific application.

Precedents Cited and Their Influence

In re ACTD LLC, 2020 VT 89, 213 Vt. 276: Establishes deferential review of agency decisions within their expertise; such decisions are presumed correct and reasonable absent clear and convincing evidence to the contrary. The Court applied this deference to the Board’s budget determinations.
In re MVP Health Insurance Co., 2016 VT 111, 203 Vt. 274:
- Delegation: Upholds legislative delegations that use general standards where more precise metrics are impracticable, especially in fluid domains like health care affordability, access, and quality.
- Findings: Requires agencies to tie findings to statutory criteria; in MVP, insufficient linkage led to reversal. Here, by contrast, the Board made extensive, tailored findings connecting the evidence to § 9456 considerations and benchmarks.
Town of Killington v. State, 172 Vt. 182 (2001): Courts sustain an agency’s interpretation of its enabling statute absent a compelling indication of error, reinforcing deference to the Board’s reading of §§ 9371, 9372, and 9456.
In re Professional Nurses Service, 2006 VT 112, 180 Vt. 479: An agency’s interpretation of its own regulations is presumed correct; the Court relied on this to uphold the Board’s implementation of Rule 3.000.
In re Handy, 171 Vt. 336 (2000): A counterexample where a statute was invalidated as an unconstitutional delegation due to a lack of any standards. The Court distinguished Handy, finding abundant standards here.
Lewandoski v. Vermont State Colleges, 142 Vt. 446 (1983): Defines “arbitrary” decisions; the Court used this to reject CVMC’s “arbitrary and capricious” characterization.
Stone v. Town of Irasburg, 2014 VT 43, 196 Vt. 356, and In re Amendment #1 to FY23 ACO Budget Order, 2024 VT 38: Articulate due process requirements—notice sufficient to avoid unfair surprise and “fairness of the whole procedure.” These were central to rejecting CVMC’s due process claim.
National Commission on Egg Nutrition v. FTC, 570 F.2d 157 (7th Cir. 1977): Cited for the principle that issues raised only by amici (here, mootness) are typically not considered when not raised by a party.

Legal Reasoning: Why the Board’s Action Was Lawful

1) Alleged “Unfettered Discretion”: The Court held that the Board’s discretion is bounded by multiple, interlocking standards—statutes (§§ 9456 and 9371), duly promulgated rules (GMCB Rule 3.000), and the annually issued guidance and benchmarks. Under MVP Health Insurance, general and flexible standards are permissible where specificity is impracticable. The FY25 Guidance specified the benchmarks and the types of evidence required to justify departures (e.g., demonstrable improvements in access, credible productivity and efficiency metrics). The Board’s comparative‑analysis tools, even without fixed numerical thresholds for every metric, were adequate and disclosed in advance.

2) Procedural Due Process: Due process requires notice and an opportunity to be heard. The Court emphasized that the “fairness of the whole procedure” controls. The FY25 Guidance, coupled with the statutory and regulatory framework and the hearing process (including public comment and input from the Office of the Health Care Advocate), provided CVMC with sufficient notice of the criteria and a meaningful opportunity to respond. No unfair surprise was shown.

3) Per‑Capita Regulation Claim: CVMC argued that § 9372(2) compelled the Board to regulate on a per‑capita basis. The Court rejected this, clarifying that § 9372 is a purpose provision—not a command governing each budget decision. The Board’s operative constraints derive from § 9456 (budget review) and § 9371 (reform principles), not § 9372. Nothing in § 9456 or § 9372 required a per‑capita approach in this case.

Evidence and Findings Supporting the Board’s Modifications

The Court credited the Board’s extensive findings, including:

Benchmark context: NPR growth benchmark of 3.5% and commercial rate benchmark of 3.4%; CVMC sought 11.9% and 5.5%, respectively.
Payer‑mix and assumptions: CVMC’s commercial rate request partially offset an assumed low (0.4%) Medicare rate increase. The Board found this Medicare assumption not credible, raising concerns about an unnecessary burden on the commercial market.
Actual vs. budget trends: CVMC’s FY24 commercial NPR and operating revenue were projected to exceed budget; expenses also exceeded budget (3.9% over). These variances undermined the justification for additional above‑benchmark commercial rate growth.
Margins and liquidity: CVMC’s FY23 total margin was −8.3%; projected FY24 total margin was 0.5%, with already low days cash on hand potentially deteriorating if expenses rose without offsetting efficiencies.
Productivity and access: CVMC exhibited low clinical productivity (e.g., nearly half of physician FTEs in specialties below the 25th percentile; close to 70% below the 50th percentile) and long wait times (21% of new patients waited 91–180 days). The Board concluded that increased NPR could be achieved by raising productivity and addressing backlogs rather than through rate hikes above the benchmark.
Administrative costs: The Board noted high administrative expenses and the absence of demonstrated administrative savings, identifying cost containment as a viable pathway to a positive margin.
Price position: CVMC’s standardized price was average in 2022, prior to sizable commercial rate increases in FY23 (12.5%) and FY24 (5%). Given the Board’s statutory duty to promote efficient and economic operation, further aggressive price increases were deemed an unsustainable solution.

Balancing these factors, the Board capped CVMC’s FY25 NPR growth at 6% and commercial rate growth at 3.4%, reasoning that targeted cost‑reduction, improved productivity, and better access management could produce necessary revenue without above‑benchmark price increases. The Board also encouraged shifting appropriate care out of the hospital setting, furthering efficiency and access objectives.

Standards Versus Quantifiable Benchmarks

A central holding is that the Board is not required to promulgate “quantifiable” standards for each efficiency or productivity metric or to set performance benchmarks for every comparative measure. Under MVP Health Insurance, general standards are acceptable when the field’s complexity and variability make fixed metrics impracticable. The FY25 Guidance’s requirements—tying above‑benchmark requests to demonstrable improvements in access/quality or to evidence of efficiency/productivity—were adequately specific to put hospitals on notice while preserving needed flexibility.

Due Process: Adequate Notice and Fair Procedure

The Court reaffirmed that due process focuses on whether parties are sufficiently apprised of the nature of the proceeding to avoid unfair surprise and whether the overall procedure was fair. The Board’s statute, rules, and annual Guidance collectively provided notice of:

What benchmarks would be applied;
The types of evidence needed to justify exceeding benchmarks; and
The comparative and contextual analyses the Board might perform.

CVMC had hearings, submitted data, and engaged on the issues the Board identified. The Court found no due process violation.

Clarifying § 9372’s Role: No Per‑Capita Mandate

Another important clarification is the Court’s treatment of § 9372(2). While reducing per‑capita expenditure growth across all payers is a stated purpose of Vermont’s health care reform, § 9372 does not impose a mandatory, case‑specific per‑capita regulation framework for hospital budgets. The Board’s duty is to execute hospital budget review under § 9456 consistent with the § 9371 principles, which emphasize access, affordability, quality, and sustainability. This distinction ensures that “purpose” statements inform but do not rigidly constrain the Board’s case‑by‑case budgeting decisions.

Impact and Implications

For Hospitals

Burden of proof: Hospitals bear the burden to justify above‑benchmark NPR or commercial rate growth with credible, data‑driven evidence.
Evidence focus: Expect scrutiny of:
- Actuals vs. budget performance and explanations for variances;
- Productivity (e.g., work RVUs per clinical FTE), access metrics (e.g., wait times), and operational efficiency;
- Administrative expense controls and concrete savings initiatives;
- Assumptions about public payer rates and payer mix (credibility is critical);
- Comparisons to peer groups and standardized price position.
Strategic posture: The decision signals that the Board favors revenue growth driven by better throughput and reduced wait times over price increases above benchmark. Hospitals should be prepared to demonstrate how operational changes, care‑setting shifts, and productivity enhancements will underpin financial sustainability and access improvements.

For the Board and Regulators

Validated framework: The Court endorsed the Board’s benchmark‑driven, annually guided process and its use of general standards tailored to a complex, evolving health care environment.
Findings matter: While fixed metrics are not required, robust, hospital‑specific findings connecting evidence to statutory factors are essential (a lesson from MVP Health Insurance).
Scope of purpose provisions: Purpose sections like § 9372 inform policy but do not impose rigid, case‑specific mandates; regulators can focus on statutory directives like § 9456 and principles in § 9371.

For Payers and Patients

Affordability emphasis: The decision reinforces Vermont’s cost‑containment trajectory by restraining above‑benchmark commercial rate growth absent strong justification.
Access and quality linkage: Hospitals seeking above‑benchmark NPR growth should tie requests to measurable access or quality gains (e.g., shorter wait times). Patients may see policy levers aimed at both affordability and access.
Care redesign: Encouragement to shift appropriate care out of hospital settings may facilitate lower‑cost, more accessible delivery models.

For Future Litigation

Deference is decisive: Challengers face a high bar to overturn Board decisions; arguments premised on “standardless” discretion are unlikely to succeed where statutes, rules, and guidance exist.
Due process challenges: Claims of inadequate notice will be measured against the clarity of the annual guidance and the fairness of the overall process, not the presence of rigid numerical thresholds.
Per‑capita arguments: § 9372 will not be read to impose a per‑capita budgeting requirement, barring legislative change.

Complex Concepts Simplified

Net Patient Service Revenue (NPR): The net revenue a hospital receives from patient services, including fee‑for‑service payments and fixed prospective payments.
Commercial negotiated rate growth: The percentage increase in prices negotiated between a hospital and commercial insurers.
Total cost of care (TCOC) growth target: A statewide cap on growth in health spending per person; Vermont’s hospital NPR benchmark was aligned at 3.5%.
Work RVUs per clinical FTE: A productivity measure; work Relative Value Units quantify physician work effort, and comparing to Full‑Time Equivalent counts shows clinical output per clinician.
Standardized price: A normalized measure enabling comparisons of hospital prices across institutions by controlling for case mix and other variables.
Medicare payment‑to‑cost ratio: Compares Medicare payments received to the cost of delivering care; ratios below peers may indicate efficiency issues or payer mix effects.
Days cash on hand: A liquidity metric estimating how many days a hospital can operate using available cash; lower figures indicate financial vulnerability.
Per‑capita regulation: Regulating spending on a per‑person basis across a population; the Court held that Vermont’s purpose statute (§ 9372) does not require per‑capita regulation in each budget decision.

Conclusion

In re Central Vermont Medical Center FY2025 affirms a significant regulatory principle in Vermont health care law: the Green Mountain Care Board may rely on general, flexible standards, operationalized through annually issued benchmarks and guidance, to review and adjust hospital budgets. The Court rejected claims of “unfettered discretion” and due process violations, emphasizing that the statutory and rule‑based framework, together with the FY25 Guidance, supplied adequate notice and meaningful process. It also clarified that 18 V.S.A. § 9372(2) states a policy purpose and does not impose a per‑capita budgeting mandate in individual cases.

On the merits, the Court validated the Board’s insistence that hospitals justify above‑benchmark NPR and commercial rate growth with credible evidence of improved access, quality, efficiency, and productivity—and its conclusion that CVMC’s evidence fell short. The decision will shape future budget cycles by channeling hospital strategies toward demonstrable operational improvements, better access, and cost containment rather than price increases. As a practical matter, hospitals can expect continued scrutiny of productivity metrics, administrative costs, payer‑assumption credibility, and alignment with statewide affordability goals.

The ruling strengthens Vermont’s benchmark‑driven oversight while preserving the flexibility necessary to navigate a complex and evolving health care environment. It sets a clear path forward: robust findings tied to statutory criteria, transparency through annual guidance, and a sustained emphasis on affordability, access, and efficiency.