Hospitals' automatic inflation adjustment to be slowed State panel aims to limit rising costs

Health care

September 10, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

In its latest move to rein in rising hospital costs, the state Health Services Cost Review Commission yesterday voted to make it tougher for hospitals to receive automatic inflation adjustments.

Hospitals did not oppose the change, but asked that it be phased in more slowly. Commissioners, however, complained that costs in Maryland are outstripping those in other states, and voted to act more quickly.

"When your house is on fire, you have to take strong and quick measures," said commission member C. James Lowthers. "You don't call in one fire truck when you need six. If we're going to have a rate-setting system, we're going to have to start putting the fire out."

The commission's action came as it received fresh data showing Maryland cost increases are continuing to outpace the nation. The rate-setters have been struggling to keep Maryland's rate of increase below the national figure. Toughening the standard for inflation adjustments represents the latest effort.

Currently, hospitals whose rates are more than 5 percent above average (adjusted for such factors as the complexity of the cases handled) are identified as high-cost hospitals. Instead of receiving automatic rate increases based on inflation, they must negotiate a "spend-down" agreement with regulators that remains in place until costs drop below average.

Under the change adopted yesterday, the 5 percent threshold will be lowered in two phases -- to 4.52 percent in six months, and then to 3 percent a year from now. The result is expected to be more hospitals on "spend-down," or more economizing by hospitals to stay below the threshold.

Hospitals asked for a slower phase-in, taking 18 months rather than 12.

"Hospitals elsewhere don't have time to adjust" to market-driven rate cuts, said Robert Murray, executive director of the commission. "That's one of the problems we have in trying to simulate a competitive marketplace. The time for discussion slows the system down, compared to hospitals elsewhere."

Data presented at yesterday's meeting showed the cost of an average hospital stay in Maryland increased 4.3 percent during the fiscal year ended June 30, while nationally, for the 12 months ended April 30 (the most recent data available), the cost declined 0.3 percent.

But Jane Ruseski, deputy director for research and methodology, told the commission that when full, audited data is available, the Maryland figure would probably drop by about 1 percentage point.

Also at the meeting, the commission approved a rate increase of 5.7 percent for Garrett County Memorial Hospital -- the first time this year it has approved an increase of more than 2.7 percent. The commission's staff said the 76-bed hospital was a special case, since its rate had been cut 8.6 percent the previous year.

Pub Date: 9/10/98

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