Maryland hospitals' profit margins fall State controls, denials of claims are blamed

Health care

December 23, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Profit margins at Maryland hospitals, at record levels the past two years, dropped sharply in the fiscal year that ended June 30, according to data from the Maryland Hospital Association.

The decline was caused by tightened state controls on hospital rates, claim denials by insurers, cuts in Medicare reimbursements for some services and a drop in patient days, said Nancy Fiedler, senior vice president of the hospital association.

"The worry has to do with the fact that there doesn't seem to be any indication the downturn is going to change," Fiedler said.

The total profit margin dipped to 4.2 percent -- down from 6.3 percent in the previous year, but in line with Maryland levels until the past few years.

Overall, total profit dropped 31.5 percent, to $229.1 million, from $334.6 million in fiscal 1997, according to the MHA's preliminary data. That's the lowest profit total since fiscal 1994.

In all, nearly two-thirds of Maryland hospitals saw their margins decline, and 10 hospitals had net losses in fiscal 1998, compared with only three the previous year, according to the MHA.

The data released by the MHA did not include figures for individual hospitals.

The state Health Services Cost Review Commission will release more information in a few months, including hospital-by-hospital figures.

That commission, which regulates hospital rates in Maryland, has been adjusting its formulas because Maryland hospital costs have been rising faster than the national average for several years.

The commission is planning "continued aggressive action" in the coming year, Fiedler said, leading to concerns that "margins could become so tight that hospitals will not be able to maintain services."

While the hospital association has expressed concern about tighter regulation, the commission and the health maintenance organization association have argued that rates need to be brought down to benefit consumers.

The HMOs and hospitals have also clashed over claims denials -- a problem highlighted by hospital association data showing accounts receivable up 19 percent since last year.

The association filed a complaint in April with the Maryland Insurance Administration against the state's two largest insurers, Blue Cross and Blue Shield of Maryland and Mid Atlantic Medical Services Inc. The insurance administration is investigating the complaint.

Pub Date: 12/23/98

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