State grants Hopkins 4.8% rate increase

9.2% rise was sought

most hospitals told to lower charges 1%

`Fair-minded approach'

Review found costs at Hopkins were below national average

Health care

July 08, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

The state's hospital rate-setting board approved yesterday a 4.8 percent boost in rates for Johns Hopkins Hospital, at a time when most hospitals' rates have been cut by 1 percent.

Hopkins, which was seeking a 9.2 percent rate increase, argued that it needed an extra $15 million a year to operate its new cancer center, which is scheduled to open in September. It also sought to set aside $25 million a year to help pay for a new children's center and a critical-care tower, projects expected to cost $120 million each. Construction is to begin in three years.

Ronald R. Peterson, president of the Johns Hopkins Health System, told the Health Services Cost Review Commission that Hopkins, although it had made a case for a larger increase, was satisfied with the "fair-minded approach" that led to the 4.8 percent figure.

In contrast, Frederick Memorial Hospital, which had been seeking an 8.6 percent rate boost, sought a public hearing after the commission's staff recommended a 2.1 percent boost. "We're not satisfied with some of the methodologies," Bill Pugh, chief financial officer for Frederick Memorial, told the panel.

The commission's staff based its recommendations on a comparison of each rate charged by the hospital with rates charged by peers in Maryland. For Hopkins, it also compared charges with those at more than a dozen academic medical centers. Hopkins' costs were below the national average, even with the rate increase.

Such rate reviews are unusual for Maryland hospitals, for which rates generally are adjusted according to an inflation-based formula. Both Hopkins and Frederick Memorial last had full rate reviews in 1987. They sought reviews this time after the commission acted in March to impose a 1 percent cut on most hospitals rather than allow inflation increases this year.

The commission has been concerned because Maryland costs have been rising faster than the national average for six straight years. The cost of an average hospital stay in Maryland was 13 percent below the national average in 1992 but now is higher than national benchmarks.

The tightening on rates appears to be working, the commission was told yesterday. For the 12 months that ended April 30, the cost of an average hospital stay in Maryland was 2.25 percent higher than in the previous year. That figure -- reflecting one month of the new, lower rates -- was down from 3.01 percent a month earlier.

Commission member Philip B. Down asked how the Hopkins increase would affect efforts to lower costs statewide.

Robert Murray, the commission's executive director, said he had been projecting decreases of 1 percent at most hospitals and about 4 percent at a few high-cost hospitals, for an overall decline of 1.6 percent. With the higher Hopkins rates, he said, the statewide savings would drop to 1.1 percent.

Peterson said Hopkins would cope with the lower-than-requested rates by cost savings and by seeking different methods of financing its new building projects.

Also at yesterday's session, the Maryland Hospital Association filed a motion in closed session asking the commission to block an effort by CareFirst BlueCross BlueShield, the state's largest insurer, to negotiate new, even lower rates with 33 Maryland hospitals.

According to minutes of the closed session, the commission took no action on the motion, saying it could not deal with the CareFirst plan until one or more hospitals applies for new rates. However, the commission said it would like the issue discussed at its meeting next month.

CareFirst maintains that its plan, which would pay hospitals per case instead of by unit of service, fits within commission rules for negotiating "alternative rates."

The hospital association has argued that the plan violates commission rules by creating a large discount for one payer. "This model system has been put in jeopardy," the association said.

Pub Date: 7/08/99

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