STATE OF VERMONT

GREEN MOUNTAIN CARE BOARD

In re: University of Vermont Medical Center
Inpatient Bed Replacement Project

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GMCB-021-14con

CERTIFICATE OF NEED
In accordance with Title 18, Chapter 221, Subchapter 5, other applicable laws and the
Statement of Decision in this matter, the Green Mountain Care Board issues this certificate of
need to The University of Vermont Medical Center (UVMMC, or the Applicant), formerly
Fletcher Allen Health Care, subject to the requirements and conditions set forth below.
Project Description and Scope
UVMMC proposes to construct a seven-story inpatient building (the Project) of
approximately 180,000 square feet above the existing emergency department parking lot. The
building will replace outdated inpatient rooms in Shepardson 3 and 4 North, built in 1960, and
permit many of the hospitals remaining double occupancy rooms in the McClure and Baird
buildings to be converted to single occupancy. The vacated space in Shepardson 3 and 4 North
will be used for non-patient care and administrative needs.
The newly constructed building will be located on the west side of the campus, with the
first two stories built on pillars over the current emergency room entrance. Four floorsthe
third, fourth, fifth and sixth levelwill each contain 32 single-occupancy, medical/surgical
rooms; the seventh floor will be the mechanical penthouse. UVMMC estimates it will take
approximately 38 months to complete construction once the CON is issued.
The Project will not increase the number of inpatient beds. The approximate number of
existing staffed beds (447) will be maintained initially, and the number of physical beds will
decrease from 509 to 496. Upon the Projects completion, the Applicant will achieve at least an
85% single occupancy rate, compared to the current 30% rate.
The University of Vermont (UVM) abuts the Applicants property and has agreed to sell
the Applicant an adjacent 1.02 acre parcel of land for $9.7M. The purchase of the land includes
compensation to UVM for costs related to housing students displaced by the loss of the
dormitories.
The total estimated cost of the Project is $187,297,729.
The Project is outlined in greater detail in the Statement of Decision in this docket, issued
today by the Board.

Certificate of Need, Docket No. GMCB-021-14con, Page 1 of 4

Requirements and Conditions

The Project as proposed, subject to the conditions below, meets the statutory criteria set forth in
Section 9437 of Title 18; therefore, a certificate of need shall issue subject to all requirements
and conditions outlined in the Statement of Decision and Order in this docket, and as stated
below:
1.

The Applicant may purchase from the University of Vermont a 1.02 acre parcel of land, as
is described in the application and under the terms stated therein.

2.

The Applicant may expend funds and commit the necessary resources to move from
architectural schematic design to construction documents that include project drawings and
specifications.

Conditions:
A. The Applicant Shall Not Commence Any Construction Activity, Including But Not Limited
To Project Site Preparation and the Purchase and Acquisition of Construction Materials,
Until It Has Demonstrated to the Board Compliance With Each of the Following
Conditions:
1.

The Applicant shall provide the Board an updated construction cost estimate for the
inpatient bed facility based on construction documents, rather than on schematic
design. The updated construction cost shall not exceed the estimated construction cost
reflected in the November 7, 2014 application of $102,423,538 by more than 8%,
consistent with the Applicants current contingency for design development.

2.

(a) For FY2016, the Applicant shall budget for, and demonstrate that it has operated at,
the levels incorporated in its management case which include:
i.
annual net patient revenue growth not to exceed 3.5%;
ii. expense growth not to exceed 2.8%; and
iii. a minimum operating margin of 3.5%.
(b) For FY2017, the Applicant shall demonstrate in its FY2017 hospital budget
submission that it will meet the following levels:
i.
annual net patient revenue growth not to exceed 3.5%; however, if the Boards
FY2017 hospital budget guidance sets a total growth cap lower than 3.5%, the
Applicant shall not exceed the cap set by the Board;
ii. expense growth not to exceed 2.8%; and
iii. a minimum operating margin of 3.5%.

3.

The Applicant shall achieve a minimum of 160 days cash on hand and a minimum
annual operating cash flow (defined as net income plus depreciation, and excludes
unrealized items) of $181.2M. The Applicant shall demonstrate to the Board that it has
held these annualized levels for at least two consecutive quarters, and provide a pro
forma demonstrating its ability to maintain these levels over the next five years.

Certificate of Need, Docket No. GMCB-021-14con, Page 2 of 4

B.

4.

The Applicant shall provide the Board a detailed schedule demonstrating that it has
received, in cash or in pledges, a minimum of $20M for use on the Project. The
schedule shall include the source of the funds, any restrictions on their use, and the
anticipated date on which the full amount of each pledge will be received.

5.

The applicant shall develop and submit to the Board an alternative financing plan in
which the Applicant will pay a minimum of 30% of the $100M debt principal within
the first twenty (20) years of the Projects life.
In Addition to Conditions A1 A5, the Applicant Must Comply with the Following
Conditions:

1. The Applicant shall develop and operate the Project in strict compliance with the Project
scope as described in the application, in other materials in the record submitted by the
Applicant, and in strict conformance to the Findings of Fact, Order and Conditions set
forth in this Statement of Decision. This shall include, but not be limited to, compliance
with the proposed conversion of rooms from semi-private to private to attain a minimum
of 85% single occupancy inpatient beds at the end of the construction period. This
certificate of need is limited to the Project and activities described therein.
2. The Project as described in the application shall be fully implemented within six (6) years
of the date of this certificate of need, or the certificate of need shall become invalid and
deemed revoked.
3. Noncompliance with any provision of this certificate of need or with applicable
ordinances, rules, laws and regulations constitutes a violation of this certificate of need
and may be cause for enforcement action pursuant to 18 V.S.A. 9445, 9374(i) and any
other applicable law.
4. This certificate of need is not transferable or assignable and is issued only for the
premises and entity named in the application.
5. If the Applicant contemplates or becomes aware of a potential or actual nonmaterial
change, as defined in 18 V.S.A. 9432(12), or a material change as defined in 18 V.S.A.
9432(11), to the scope or cost of the Project described in its application and as
designated in this certificate of need, the Applicant shall file a notice of such change
immediately with the Board. The Board shall review the proposed change and advise the
Applicant whether the proposed change is subject to review.
6. The Applicant shall file implementation reports with the Board at three-month intervals
after the date of this certificate of need through the date all components and phases of the
Project are complete and fully operational. The implementation reports shall include the
following information and analysis:
a. Overview of the Project, including information and analysis demonstrating that
the Project is in conformance with the scope of the Project as described in the

Certificate of Need, Docket No. GMCB-021-14con, Page 3 of 4

application. Such reports must identify any changes to the financing of the
Project and shall include (i) days cash on hand, (ii) operating expenses, (iii)
utilization projections, and (iv) any change or anticipated change to credit rating.
b. A separate spreadsheet showing quarterly expenditures by individual line item.
The spreadsheet shall show the approved overall amount per the application, the
amount spent during the quarterly reporting period, the amount spent to date, and
the amount remaining in both dollars and in percentages.
c. Notice of any material or nonmaterial change, or verification that no material or
nonmaterial changes are contemplated or have occurred.
If any financial indicators forecast a change in overall debt capacity, the Applicant must
provide the Board a reconciliation report that includes options for reducing or eliminating
other capital expenditures, expense reductions, productivity management initiatives, and
investment fund distribution.
7. The Board may, after notice and an opportunity to be heard, make such further orders as
are necessary or desirable to accomplish the purposes of this certificate of need, and to
ensure compliance with the terms and conditions of this certificate of need.
8. All reports, notices, forms, information or submissions of any kind required to be
submitted to the Board as a condition of this certificate of need shall be signed by the
Applicants chief executive officer and verified by the chief executive officer, or by his
or her designated representative.
9. The conditions and requirements contained in this certificate of need shall remain in
effect for the duration of the reporting period defined in paragraph B.2, above.
SO ORDERED.
Dated: July 1, 2015 at Montpelier, Vermont.
s/

Alfred Gobeille

s/

Jessica Holmes

s/

Betty Rambur

s/

Allan Ramsay*

) GREEN MOUNTAIN
) CARE BOARD
) OF VERMONT
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Filed: July 1, 2015

* Board member Ramsay does not agree to impose Conditions A.2, A.3, or A.5, which he
explains in his concurrence to the Statement of Decision. Board member Cornelius Hogan filed a
dissent in this matter and therefore has not signed the certificate of need.

Certificate of Need, Docket No. GMCB-021-14con, Page 4 of 4