I applaud efforts to cut any excess costs out of our health care system. But that effort must be put into the context of a wise and evolving public policy that transforms without destroying. In Maryland, that no longer seems to be the case.
Instead, the climate for cost cutting has produced Tunnel Vision Syndrome, in which regulators see only one path, without regard to the ripple effect of their actions and without modeling the cumulative financial impact of actions taken by other state agencies, or by managed care organizations.
The impact will be devastating to the Johns Hopkins Hospital -- and to long-range economic plans of the city and state. The numbers tell the story.
Hopkins Hospital is managing rate cuts demanded of all hospitals by the state's Health Services Cost Review Commission (HSCRC), as well as revenue cuts certain to come from the state's new Medicaid Managed Care program. The combined effect chops 10 percent from Hopkins Hospital's revenue in one year. That translates into a requirement to cut our operating budget by $54.5 million between July 1 and June 30, 1998.
Should the state be cheering this cost reduction? I think not. Regulators may achieve short-term gains in reducing hospital revenues, but at the cost of crippling a major regional economic resource and national treasure. Hopkins is only one among many hospitals in Maryland, but we differ in some very critical ways. Unlike the other hospitals in the state, our patients come from well beyond the community, Maryland and the region. In reality, when we compare ourselves to our national peers, our costs are absolutely in line, or better. This, combined with our ranking as the best hospital in the nation for six consecutive years, has resulted in a considerable flow of business to Maryland from out of state and overseas. In the past year alone, 6,000 international patients sought care at the Johns Hopkins Hospital, bringing $30 million in international business to us and another $10 million in business to hotels, restaurants and shops. And this does not count revenue from the thousands of patients who come from all over the United States.
The regulatory commission's current plan to impose a "System Correction Factor" of further cuts must be seen in the context of the equally short-sighted actions of the Department of Health in developing a payment formula for managed care. This formula ** puts teaching hospitals like Hopkins at a disadvantage by giving windfall revenues to nonteaching hospitals and will have the chilling effect of inhibiting our ability to compete for patients on a national and international level. It is a formula for disaster.
