Health-care system is now over-stressed

Cost-cutting: Mandated reductions may endanger quality of care in urban areas.

July 14, 1999

HEALTH CARE providers are under pressure to cut costs -- and then cut some more. From all directions, hospitals, nursing homes and physicians are feeling the fiscal squeeze, and worrying about their long-term ability to deliver quality care at a far lower price.

In Maryland, the state's cost-control commission wants to lower hospital charges by 1 percent this year and more the next two years. This comes after stiff cuts in Medicare payments. More cuts will be needed through 2002 for Congress to stay within its budget caps. And now CareFirst (Blue Cross and Blue Shield of Maryland) is pressuring hospitals to reduce rates another 8 percent. If CareFirst succeeds, other managed-care insurers will seek similar reductions.

All these pressures come at a time when the profitability of Maryland hospitals is on the decline, particularly in Baltimore. The projected profit margin for city hospitals this year is just 1 percent, vs. 4.3 percent in 1997. One of the city's biggest hospitals, University of Maryland Medical Center, lost $11.8 million last year and was projecting a loss of $4.5 million this year -- before CareFirst announced its rate request that would deepen that deficit.

Patients are caught in the middle. Wringing excess spending out of the nation's bloated health-care system is a worthy objective. But so is top-flight medical treatment. The two objectives are increasingly at odds.

The problem is one of perspective. Insurers and government budget-cutters look at curbing rising medical costs as the goal. Physicians and hospitals look at improved but more expensive medical treatment as the priority.

Growing consumer anger over insurers' rules has spilled into the legislative arena. Doctors were so infuriated by cost-cutting practices of HMOs that the conservative American Medical Association voted to form a union.

Pressure continues to build for a more reasoned and sensible approach to health care. Policy makers in Washington, and in Annapolis, though, keep ducking the tough decisions. But the conflict between cost-cutting and quality medical care won't go away and could be at the heart of next year's presidential campaign.

Pub Date: 7/14/99

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