Hospital's bid to exceed rate-increase limit is rejected Union Memorial denied by state board

Health care

July 02, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Presented with fresh evidence that its cost-control efforts have fallen short, the state's hospital rate-setting commission yesterday denied Union Memorial Hospital's request for a rate increase in excess of commission guidelines.

In its meeting, the Health Services Cost Review Commission dealt with the past, present and future of holding down hospital costs.

The commission's staff reported that the cost of an average hospital stay in Maryland over the 12 months that ended April 30 increased 3.41 percent, while costs nationally were dropping slightly. The gap between Maryland and national performance "can only be described as disastrous," J. Graham Atkinson, a consultant to the commission, said.

Concerned about that gap over the past few years, the commission began imposing in April a 2.7 percent ceiling on inflation increases granted to hospitals. Union Memorial, saying its costs were low and it is losing money, asked last month for an exception to the ceiling -- a 3.9 percent increase. Yesterday, the commission unanimously voted to hold the Baltimore hospital to the 2.7 percent figure.

As the commission considered possible further adjustments to its rate-setting formulas for next year, hospitals complained that a tight squeeze could hurt programs, while HMOs called for more aggressive controls to bring Maryland increases in line with national benchmarks.

Reviewing performance over the past year, Jane E. Rusesksi, deputy director of the commission, said the commission's efforts had moderated rate increases somewhat, but still had not succeeded in bringing Maryland in line with national trends.

Jack Keane, a consultant to the Maryland Association of Health Maintenance Organizations, said the hospital industry in the state had "spent its inheritance," as cost increases over the past few years had wiped out an advantage over national rates built up over more than 15 years of rate regulation.

And Sean Cavanaugh, associate director, said that at current rates of increase, Maryland would lose its unique Medicare waiver in 2003. The waiver, the only one in the nation, means that the federal Medicare program pays commission-set rates, which helps pay for the cost of hospital care for the uninsured. If Maryland rates got too high, however, the waiver would be canceled.

That past performance was in mind as the commission applied (( its guidelines to Union Memorial. "The rate-setting system is in dire straights," commission member Dean E. Farley said.

Paul A. Sokolowski, vice president and chief financial officer of Union Memorial, said the commission's action would cost Union Memorial about $2 million in revenue. He said the hospital had not yet decided what impact this might have. "It's another tough environmental factor you have to figure into your strategic planning," he said.

Looking to proposed adjustments for the future, James J. Xinis, president of Calvert Memorial Hospital, said formula adjustments the commission is considering for next year would be "too many changes, too fast, with too great a level of severity."

Atkinson, on the other hand, told the commission, "If you want to have any hope of coming up to national performance, you're going to have to be quite aggressive in changes you make to the inflation adjustment system for next year."

Pub Date: 7/02/98

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