2 'high-cost' hospitals to limit rates Kernan, Shady Grove agree to get patient cost below state average

Medical care

October 15, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

The state's hospital rate-setting commission yesterday approved its first "spend-down" agreements negotiated under more stringent rules.

Kernan Hospital in Baltimore and Shady Grove Adventist Hospital in Rockville, identified by the commission as "high-cost" hospitals, have to get their cost per patient down to 2 percent below the state average over the next 2 1/2 years.

Previously, high-cost hospitals have only been required to get to the state average, not to go below it.

"In the current environment, when we're under-performing the nation, we need to be more aggressive," said Don S. Hillier, chairman of the Health Services Cost Review Commission, as the panel approved the spend-down agreements.

Maryland's cost for an average hospital admission has increased faster than the national average for five years in a row, and the rate-setting commission has been tightening its rules to try to bring Maryland costs below the national figure.

Robert Murray, the commission's executive director, said the commission's staff also plans to renegotiate its five existing spend-down agreements to get those hospitals below the state average cost.

The five currently on spend-down, with a goal of reaching the state average, are University of Maryland Medical Center, Bon Secours Hospital and Liberty Medical Center, all in Baltimore; Howard County General Hospital in Columbia; and Southern Maryland Hospital Center in Clinton.

In identifying high-cost hospitals, the commission adjusts for the types of cases a hospital handles and for other factors, such as local labor markets.

Hospitals that are more than 5 percent above the state average are identified as high cost -- but that margin will drop to 3 percent next year under another rule change designed to rein in costs.

Until they reach the targets, the high-cost hospitals get lower-than-normal inflation adjustments to their rates.

In some cases, the rates come down; in others, they simply go up more slowly than they otherwise would.

Hospitals also can get the average cost per admission down through cost-saving measures.

Kernan is 8.08 percent above the state average; Shady Grove is 5.45 percent above it.

Pub Date: 10/15/98

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