19.2% rise OK'd for Taylor Manor

Psychiatric hospital still seeking a boost in Medicaid rates

March 08, 2001|By M. William Salganik | By M. William Salganik,SUN STAFF

The state's hospital rate-setting commission approved yesterday a 19.2 percent increase for Taylor Manor and began a contentious debate on setting statewide hospital rates for next year.

Taylor Manor, an Ellicott City psychiatric hospital, had said it was in danger of closing without an increase. Even with the rate increase approved yesterday, which applies to commercial insurers, the hospital's future is uncertain unless the state also raises Medicaid rates, said Dr. Bruce Taylor, the hospital's chief executive.

As for an across-the-board rate increase for the fiscal year that begins July 1, the Health Services Cost Review Commission's staff recommended that hospitals get half a percentage point -- or $31 million -- above inflation. Hospitals said that wasn't enough. Insurers said it was too much. The decision will be made over the next few months.

The Taylor Manor case dates to December, when the hospital asked for a 29.7 percent increase. With the 19.2 percent approved yesterday, Taylor told the commission, the hospital can run close to break-even -- if it also gets a corresponding increase in Medicaid rates.

"Whatever we do here for our commercial carriers is just half of the solution," he said. Taylor Manor and the state's other four private psychiatric hospitals -- which, as a group, project losses of $7 million this year -- have been asking the governor and legislature to include an additional $9 million in next year's budget to bring Medicaid reimbursement levels up to commercial rates.

Taylor said he now will get about $600 a day from commercial insurers, but only $450 from Medicaid -- a rate at which he will lose about $100 per day per patient. Currently, about half of Taylor Manor's patients are paid for by private insurers, while the other half are paid by Medicaid.

Without a Medicaid rate increase, Taylor said, the hospital will have to stop taking Medicaid patients or close entirely. The 93-year-old facility treats about 2,000 patients a year and has 450 employees.

An across-the-board rate increase greater than inflation would change a three-year plan approved last year. Hospitals got a 2.5 percent increase this year, and are due to get increases equal to inflation in the next two years, with an additional bonus or penalty based on whether Maryland's cost increase is higher or lower than the national average.

That arrangement came out of a lengthy study and was designed to produce a system that ended an annual debate between hospitals and insurers over how much hospitals rates should go up.

"We put the system on autopilot, but that didn't mean we couldn't put our hands back on the wheel based on new information," Robert Murray, the commission's executive director, said yesterday in recommending the additional adjustment. Health inflation over the past year, he said, had been about 3.5 percent, and while hospitals wanted an adjustment to cover the full gap between that and their 2.5 percent increase, the staff recommended that the commission split the difference.

Calvin Pierson, president of the Maryland Hospital Association, told the commission, "Maryland hospitals' operating margins are significantly below the nation. We don't think they're sufficient to continue to provide quality care." Nearly half the state's hospitals, he said, are running in the red.

But Robb Cohen, a consultant representing UnitedHealthcare of the Mid-Atlantic, a large insurer, said hospitals were actually more profitable, taking into account investment income.

Barry Rosen, a lawyer representing another insurer, Mid Atlantic Medical Services Inc. (MAMSI), said adjusting the agreed-upon formula would lead to "an annual free-for-all."

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