Noting low reimbursement levels and cumbersome paperwork, Taylor Manor, a psychiatric hospital in Ellicott City, announced yesterday that it will stop taking Medicare patients at the end of the month.
Medicare pays about $100 less than the $600-a-day rate set by state regulators and paid by commercial insurers, and even the $600 level is about $100-a-day less than it costs to deliver care, said Dr. Bruce T. Taylor, chief executive and medical director of the Taylor Health System.
"It's supposed to be fair, but it isn't" he said.
Taylor is seeking to have both Medicare and Medicaid reimburse psychiatric hospitals the way they pay acute general hospitals in Maryland - according to rates set by the state's Health Services Cost Review Commission. Taylor said Medicare accounts for about 20 percent and Medicaid for about 40 percent of the inpatient care at his hospital, and that those figures are typical for psychiatric hospitals in Maryland.
With all the psychiatric hospitals in the state losing money, a change in reimbursement is needed, Taylor said. He said he had told state officials that his hospital and the entire psychiatric hospital industry is under stress.
According to the Maryland Hospital Association, the three psychiatric facilities that file financial reports with it lost money on operations in the year ending June 30: Sheppard and Enoch Pratt Hospital in Towson lost $2.4 million, or 3.3 percent of revenue; Brook Lane Health Services in Hagerstown lost $285,000, or 3.2 percent; and Taylor Manor lost $1.4 million, or 10.2 percent.
The financial pressure on psychiatric hospitals is not just a result of low payments by Medicare, the federal program for the elderly, and by Medicaid, the state-federal program for low-income and handicapped people. Managed care insurers, along with psychiatric medications, have pushed more care to outpatient settings and shortened hospital stays for those who get inpatient treatment.
The average patient at Taylor Manor now stays seven to eight days, Taylor said, "but that was two to three times longer before managed care."
The result is a shrinking patient base for the hospitals.
Taylor - the third generation of his family to run the privately owned hospital - said his facility, licensed for 204 beds, had 125 patients on a typical day a decade ago. Now, it is likely to have 40 to 50, with about 10 of them being Medicare patients.
With the closing of the geriatric program, Taylor said, the staff, about 18 people, will be reassigned to fill vacancies at the hospital.
Medicare patients admitted before the end of the month will be able to stay until their treatment is completed, he said. Taylor Manor has participated in Medicaid for about a decade.
Nancy Fiedler, senior vice president of the hospital association, said that, while the association is aware of the Medicare problem, "our focus now is talking with the state about Medicaid rates, trying to increase the funding. It should be closer to what insurers are required to pay on the commercial side."
Taylor favors covering psychiatric hospitals under the state's Medicare waiver from the federal government. Under that waiver, the government agrees that both Medicare and Medicaid will pay state-set rates at the acute-general hospitals as long as the system as a whole keeps costs below the national rate.
Harold A. Cohen, the founding executive director of the rate-setting Health Services Cost Review Commission, said that when the waiver terms were set more than two decades ago, "We didn't negotiate the psych hospitals into the waiver because we didn't want to regulate them in the first place. For acute-general hospitals, you know what the product is, what you're setting the price for. With the psych hospitals, we weren't sure we knew how to measure what they were doing."
Fiedler said inclusion of the psychiatric hospitals under the waiver has been discussed often over the decades.
"We've talked about it dozens of times with the psychiatric hospitals, but we've never formally advanced it" as a recommendation, she said.
Taylor said he had always been told the general hospitals feared that including the psychiatric hospitals, with the longer lengths of stay, would bring up the state's average costs, penalizing all the hospitals on the comparison with national rates they need to preserve the waiver.
Because Medicare does not pay them state-set rates, the psychiatric hospitals have to file reports on their actual cost of care for Medicare patients, including, Taylor said, such cumbersome procedures as "measuring pounds of laundry."
Then the reports go through a long process of review and audit. Taylor said his facility and the Medicare agency are still disputing half a million dollars in costs for 1996.
"Some years," he said, "we thought we made a little money, only to find out a few years later that Medicare wasn't satisfied."