Hospital-rate legislation in the works

March 03, 1995|By John Fairhall | John Fairhall,Sun Staff Writer

Prodded by hospitals like Johns Hopkins and the University of Maryland, legislators began work yesterday on bills that would expand state regulation of the health industry.

The immediate issue is whether the state's system for regulating hospital rates should be extended to the growing outpatient surgical centers, nonhospital facilities that perform operations like cataract removals and send patients home the same day.

But as nontraditional health care providers and managed-care companies transform the state's health care system, the argument over what to do about the centers is becoming part of a larger debate over regulation.

Hospitals say the bills discussed yesterday by House and Senate committees are needed to bolster their financial health and to preserve Maryland's system for paying the medical bills of poor people.

"This is really very urgent," said Dr. Donald E. Wilson, dean of the University of Maryland School of Medicine. "The pressures are increasing upon us daily as the marketplace heats up."

Opponents, which include insurance companies and doctors, say the legislation would put a regulatory choke-hold on innovation and the cost-cutting competition that is making health care more affordable.

Surgical centers, which now number about 85 in Maryland, are taking patient business from hospitals by offering lower rates.

But hospitals charge that the centers have an unfair price advantage because they don't have to pay for care for the poor and for residency programs for young doctors, costs that regulators build into the rates that all patients pay at hospitals like Hopkins and the University of Maryland.

Hospitals say the legislature should extend the rate regulation to surgical centers, requiring them to share part of the burden of what the hospitals term societal obligations. The proposed legislation also would require nonteaching hospitals to pick up part of doctor training costs.

The hospitals have won some legislative friends with the argument that without a change in the system, hospital finances will deteriorate, dragging down Maryland's means of paying for care for the poor.

But health maintenance organizations -- which are gaining political clout as they grow in the marketplace -- are raising doubts about the legislation by arguing that new regulation will stymie innovation and push up costs for consumers.

The House bill that would regulate surgical centers also would create new regulations for HMOs and for emerging "community health networks," hospital-doctor alliances offering complete packages of patient care.

Del. John Adams Hurson, House majority leader, said the surgical-center issue indicates that the regulatory system is "leaking." Although the bills that are before both the House and Senate would plug a couple of holes, some legislators are asking whether it's time to rethink the whole system.

"Is it time we start to look at the entire [regulatory] process?" asked Del. Ronald A. Guns.

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