GBMC cuts outpatient surgery fees

June 29, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

Bowing to pressure from more efficient independent surgery centers, the Greater Baltimore Medical Center announced yesterday that it would lower prices on same-day surgery by 30 percent.

The dramatic price reduction, effective Friday, is a bid by GBMC to keep its outpatient business from being siphoned off by the centers, and comes as insurance companies around the country begin directing doctors to less-costly venues to care for their patients.

"We had physicians come in and complain of letters they got [from insurance companies] that say, 'You've got to bring your patient to X-Y-and-Z Center,' " GBMC President Robert P. Kowal said. With reduced prices, he said, "there will be no financial reason to take patients elsewhere."

The move will require cutting expenses by $9 million, and Mr. Kowal said the hospital expects its overall profit margin to drop by half this year largely as a result of it.

Maryland's hospital industry is heavily regulated, with rates established by a state agency. But until recent years, little attention was paid to outpatient rates and how those compared to generally lower costs in such settings.

"Because our focus has been on inpatient, outpatient services did not have the same level of scrutiny," said Robert Murray, executive director of the Health Services Cost Review Commission, which regulates rates. "So hospitals have more flexibility on the outpatient side," he said, noting for instance that prices for supplies and drugs used in outpatient surgery are not regulated.

What happened over the years is that hospitals charged the same operating room rate for minor procedures as it did for general surgery. One result was charges rose dramatically and, in some cases, hospitals were undercut by freestanding centers whose prices more closely paralleled costs.

Hospitals can reduce rates voluntarily by refusing to make inflation adjustments and by cutting costs. The new prices reflect the lower cost of outpatient care as well as changes GBMC is making to reduce costs. For instance, the hospital will cut prices of surgical supplies and equipment used in outpatient surgery.

GBMC gets about 35 percent of its annual revenues -- $160 million last year -- from outpatient surgery. So far the hospital hasn't lost much business to freestanding centers, Mr. Kowal said, but that could change. The new prices are designed to retain current business and possibly attract new business.

GBMC performed 17,000 outpatient procedures last year, more than any other community hospital in the state, it said.

It was able to reduce staffing costs by 27 percent when it redesigned admissions and discharge procedures for a new set of outpatient gynecological surgery suites in November. It will save about $100,000 in endoscopy by using reuseable equipment, and the price of an implant lens for cataracts has dropped to $60 from $231 after the hospital switched vendors.

Dr. C. P. Wilkinson, chair of ophthalmology at GBMC, said the hospital is cutting costs "to attract the attention not only of the public but of the third-party carriers. As HMOs and PPOs (preferred provider organizations) become a reality in Maryland, people are going to be aware that some offer a much better range of service than others. We hope to attract patients indirectly by attracting their insurance companies," he said. "The only way to do that is to lower prices."

GBMC also is forgoing its annual rate increase for inflation in selected inpatient surgery departments. Essentially, prices would remain at last year's level in pediatrics, obstetrics, nursery, labor and delivery.

"It is the latest example of how hospitals are responding to pressure" from freestanding facilities, said Nancy Fiedler, senior vice president for communications of the Maryland Hospital Association. She said a number of hospitals are looking at ways to reduce prices and become more competitive.

Three health insurers, Kaiser Permanente, Columbia-Freestate, and Prudential Healthcare Plan of the MidAtlantic, all indicated interest in using the hospital as a result of the competitive price cut, Mr. Kowal said.

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