Md. health care tab up 10.6% as hospital bills keep rising

Greater use of services, more complex procedures

April 23, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

Mounting hospital bills, especially for outpatient services, were the largest driver of increased health costs in Maryland, according to a report presented yesterday to the Maryland Health Care Commission.

Overall, health spending in Maryland by private insurers was 10.6 percent higher in 2001 than in 2000, according to the report - about the same as the 10.5 percent rate nationally.

"Price inflation explained only a small part of the growth," Ben Steffen, deputy director for data systems and analysis, told the commission at its meeting in Baltimore yesterday. More use of services and the development of more complex (and more expensive) procedures accounted for the bulk of the increase, Steffen said.

The commission is interested in what's pushing costs up because it has been directed by the legislature this year to make Maryland's policies for small employers more affordable. The commission sets benefits and other rules for the small-employer plans.

Hospital services accounted for 35 percent of the Maryland spending growth, the report found, compared with 27 percent of the growth in national spending. And while inpatient spending grew at a 7 percent rate in Maryland, the increase in outpatient spending was more than double that, at 18 percent. The cost of an average hospital stay in Maryland increased 5.4 percent over that period, Steffen said, reflecting higher rates and more service, on average, given for each stay.

Physician services accounted for another 32 percent of the Maryland growth. The report found no rate increases for doctors; costs went up because there were more patients and more services per visit. For HMO plans, which control patient access more tightly, doctor costs rose only 5 percent. For other types of insurance, doctor costs jumped 16 percent. A decline in HMO enrollment- from 39.4 percent of privately insured Marylanders in 2000 to 34.4 percent in 2001 - means fewer patients under tight controls, and may account for the use of more services, Steffen said.

That tracks national studies. Jon Gabel, vice president for health systems studies at the Washington-based Health Research Education Trust, said emergency room use, one of the components of outpatient service costs, had increased significantly since many states made it more difficult for HMOs to deny claims for emergency care.

Other factors include changes in technology so "we're able to do more surgery in outpatient settings," and rising wages for hospital workers as hospitals compete for nurses and other caregivers who are in short supply, said Gabel, who has done a number of studies on health inflation.

The increase in costs for prescription drugs accounted for 15 percent of Maryland health cost growth, well below the 21 percent national figure. Steffen told the commission that Maryland's drug inflation had run ahead of national figures in previous years, and he wasn't sure why it had dropped below in the most recent study.

In other business yesterday, the commission released for comment new regulations preventing hospice and home health agencies from selling "grandfathered" rights that allow them to operate statewide.

The new regulations follow a dispute between several small, locally based hospice programs and Washington Home and Hospice, which has been expanding in several Maryland counties. The health care commission has, for about a decade, limited new hospice programs to operating in a specific county. Older programs, however, which had begun without geographical license limits, were "grandfathered" and allowed to operate statewide.

The dispute came when the D.C.-based Washington Home bought the "grandfathered" hospice program of MedStar Health and began expanding.

Under the proposed regulations, the older hospice and home health agencies, if sold, would be limited to offering services in the counties where they were operating in December 2001.

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