Hospital payments rise in Md.

Average payment's increase least since rates tracked in '70s

`Finally reaping rewards'

Cost review panel credits actions taken to rein in charges

Health care

April 06, 2000|By M. William Salganik | M. William Salganik,SUN STAFF

The payment for the average stay at a Maryland hospital increased just 2.29 percent in the past fiscal year - the lowest increase ever recorded, the Health Services Cost Review Commission reported yesterday.

The commission has been setting rates and tracking the financial condition of Maryland hospitals since the mid-1970s.

"Marylanders are finally reaping the rewards of the hard work of cost containment," said Don S. Hillier, commission chairman. "Recent steps taken by the commission to constrain rising costs in our hospitals are working."

The rate-setting commission, concerned that Maryland's costs had been rising faster than other states' through much of the 1990s, has revised its formulas several times in recent years to hold down increases.

The most stringent, a 1 percent reduction in charge per case at most hospitals, didn't go into effect until last April, and so had a limited impact on the period covered by the report, the 1999 fiscal year that ended June 30.

Yesterday's report follows by a week one by the Maryland Hospital Association on the flip side of the same trend: lower hospital profits. The MHA showed the lowest hospital profits in a decade.

The Cost Review Commission's report also tracks hospital profits, but calculates the margins in a different way than the MHA. The commission uses a fiscal year rather than a calendar year and looks at operating profits only for the care for which it sets rates -- acute inpatient stays and outpatient care delivered in the hospital.

Measured this way, hospital operating margins were flat, but not down. Robert Murray, executive director of the commission, said this showed the shrinking hospital profits were caused not by actions of the rate-setting commission, but by cutbacks in payments for services the commission doesn't regulate, such as home health care, skilled nursing and subacute care.

But Larry Lawrence, a vice president of the hospital association, said the commission has to "look at the whole picture" and "strike a balance between an appropriate rate and what the hospital needs to provide the care and have an adequate staff."

Other findings:

Most hospitals continued to show operating profits, as the commission measures them. Five moved into the red during the fiscal year: University of Maryland Hospital (measured separately from its Shock Trauma Center and cancer center, which were profitable); Franklin Square Hospital in eastern Baltimore County; Holy Cross Hospital in Silver Spring; Civista Medical Center in La Plata; and Liberty Medical Center in Baltimore, which closed in July.

Maryland hospitals provided $485 million in care for the uninsured, equal to 8.3 percent of gross revenue. That was up from $459 million, or 8.2 percent of gross revenue, in fiscal 1998. Under the Maryland rate-setting system, hospitals can build the cost of such care into the rates paid by others.

The cost of an average hospital stay in Maryland -- $7,907.51 -- is estimated to be close to the national average. Last year, regulators said Maryland costs were outstripping the nation, but the national data they were using was subsequently corrected. Hospitals will be allowed larger inflation adjustments beginning July 1.

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