Hopkins hospital wins 6.07% rate increase

State panel's OK will add $42 million to bills of patients

January 29, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

After several hours of technical debate, the Health Services Cost Review Commission unanimously approved a 6.07 percent rate increase for Johns Hopkins Hospital yesterday.

That will add about $42 million a year to patients' bills at Hopkins. Under the commission's rate-setting formula, any extra increase granted to one hospital comes out of the statewide inflation adjustment applicable to all hospitals in the next fiscal year, which begins July 1.

Saying they were worried about the affect of the rate increase on the state's 51 other hospitals, the commission agreed to appoint a work group to review the inflation formula.

Hopkins initially sought a 14.5 percent increase over two years. Ronald R. Peterson, chief executive of the Johns Hopkins Health System, told the commission yesterday that the increase "should allow us to preserve the national stature we've enjoyed."

He said Hopkins' financial position had declined over several years of tight rate controls, and that the hospital needed to generate more cash to cover a construction and modernization program expected to cost three-quarters of a billion dollars over the next decade.

Hopkins presented data to show that higher rates are justified because its patients are sicker than those at other hospitals.

"There's no question in my mind that the severity of patients at Johns Hopkins justifies this [increase]," said commission member Larry Grosser. "But it's a ton of money."

A dozen other hospitals this year have gone through rate reviews and won increases over the 3.97 percent general rate increase granted in July. The increase represents the rise in inflation for hospital costs, from nursing salaries to bandages.

Hopkins, as the largest hospital in the state - it provides about 12 percent of the care - has by far the largest impact on overall costs. The other 12 increases, added together, equal about as much as Hopkins', said Robert Murray, the commission's executive director.

Murray told the commission that hospitals could be facing an across-the-board inflation adjustment next year of 1 percent or less. The commission agreed with Murray's recommendation to have a study of how to make sure next fiscal year's inflation figure is fair to all hospitals.

Harold Cohen, a consultant to the Kaiser Permanente HMO, objected to the idea of giving a larger inflation adjustment next year, saying it would add to costs for consumers and violate an agreement reached two years ago among hospitals and insurers on how inflation should be handled.

"Rather than have a committee to rework the agreement," Cohen told the panel, "you should have a committee to study how to better manage within the agreement."

Also debated was the method the commission used to measure whether Hopkins patients are sicker. Jack Keane, a consultant for CareFirst BlueCross Blue- Shield, said using one measurement method for Hopkins and a different one for most other hospitals would open the door for hospitals to "cherry-pick" the statistical methods that resulted in the highest rates.

But Hopkins' consultant, Kenneth E. Thorpe, chairman of the health policy and management department at Emory University, said Hopkins was so different from community hospitals in its services and technology that complex adjustment methods were the only way to compare them fairly.

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