Regulations stir debate as Md. eyes ways to cut costs

Legislature might name commission to decide on hospital closings

Health Care

January 24, 1999|By M. William Salganik | M. William Salganik,Sun Staff

This could be the year Maryland gets tougher health regulation in an effort to keep costs down. Or less regulation, in an effort to keep costs down. Or the same regulation in a different package.

Tougher regulation could come from the Health Services Cost Review Commission, which sets hospital rates. The commission has set a goal of bringing the cost of an average Maryland hospital stay -- now about 3 percent above the national average -- to 3 percent below the national average within three years.

That would mean rate cuts that would be "totally unacceptable" to the hospitals, said Calvin M. Pierson, president of the Maryland Hospital Association. The hospitals have made a counteroffer to freeze rates in lieu of the reductions.

The commission is expected to act in March. The legislature is also considering whether to appoint a commission to decide on hospital closings, given an ever-increasing surplus of hospital beds. On an average day, barely half the licensed hospital beds in the state are filled.

Some continue to press for tougher regulation of health maintenance organizations, as well. There will be another push to increase the liability of HMOs that refuse to approve care for patients. The state medical society has made such legislation one of its priorities for this session, though similar bills have failed in the past. In addition, some will press legislators not to adopt more HMO controls until they can gauge the effectiveness of a new system that allows patients to appeal disputes with HMOs over treatment denials to the state Insurance Administration. The grievance process went into effect this month. Opponents of tougher HMO regulation say it would drive premiums up. Some look to deregulation to keep costs down. The Cost Review Commission, for example, might deregulate outpatient rates, a move it believes could lead to lower prices. Another push for deregulation will come from hospitals that want to eliminate state approval for a hospital to perform open-heart surgery.

While regulators consider whether to loosen or tighten the reins -- or do some of each -- legislators are considering streamlining the regulatory process by combining some or all of the regulatory boards.

National legislative and regulatory efforts will continue to have an effect on costs and services in Maryland. Nursing homes will come under a new reimbursement system. And Medicare is attempting to devise a new payment system for HMOs, which could curb the exit of HMOs from Medicare markets.

Despite all the state and federal actions aimed at controlling spending, health costs, which grew relatively slowly for a few years as managed care spread, are expected to continue to accelerate. Health premium increases in the range of 5 to 7 percent are projected.

The cost of prescription drugs is a particular concern, as several promising but expensive medications are expected on the market this year.

Seeking cost efficiency, managed care insurers are consolidating rapidly. With national-level deals, one of the major commercial players in the Baltimore-Washington market, Aetna U.S. Healthcare, has taken over NYLCare and expects to close a deal for the Prudential health plans in the second quarter of this year.

The Maryland and District of Columbia Blue Cross plans are now combined under the brand name CareFirst BlueCross BlueShield, and they are seeking approval to add the Delaware blues.

Mid Atlantic Medical Services, Inc., a Rockville-based managed care company that covers 1.7 million people in the region, is also seen as a possible takeover target. Consumers are likely to see little impact this year. Both Walter Cherniak, a regional Aetna spokesman, and Debbie McKerrow, a CareFirst spokeswoman, said doctor networks and insurance products will be unlikely to change this year.

While insurers are combining rapidly, physician groups are coming apart, and the pace of hospital mergers may be slowing.

Large physician groups, formed to seek managed care contracts, have not been faring well. The largest in the area, Doctors Health, filed for bankruptcy in November. Another, Premier Medical Associates, is dissolving. The remaining large physician groups have slowed their pace in acquiring practices.

Hospitals are still talking merger with each other but, like doctors, seem in less of a rush to sign deals.

"As we mature, we realize that just bulking up the number of hospitals in the system doesn't get you anywhere," said Warren Green, chief executive officer of LifeBridge Health, created last year by the merger of Sinai Hospital and Northwest Hospital Center.

While there will continue to be mergers, Green said, there seems to be little likelihood that Baltimore area hospitals will quickly coalesce into three or four giant systems, as many had predicted.

Hospitals are moving away from acquiring related businesses, such as physician practices and home nursing agencies. Hospitals will still look to such related businesses to coordinate care, but no longer think it's best to own all the pieces of a complete system.

"Returning to basics is what hospitals ought to do," said Robert P. Kowal, president and chief executive officer of Greater Baltimore Medical Center. "Other people can run home health agencies and nursing homes."

Pub Date: 01/24/99

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