Long career in hospital system draws to close

October 03, 2006|By M. William Salganik | M. William Salganik,Sun reporter

In 1971, when Edgar "Larry" Lawrence was about to start work at the Maryland Hospital Association, he was invited to dinner by his new boss, Don McAnaney, then the deputy director of the association.

During dinner, the association's director, Richard Davidson, called to say the governor had signed into law a bill creating a hospital rate-setting commission.

"We are assured of having jobs for the next five years," Davidson told McAnaney.

For Larry Lawrence, the five-year projection turned out to be 30 years short.

Lawrence retired last week as senior vice president of the association, where he has spent much of the last 35 years in the arcane world of regulated hospital rate-setting.

Lawrence's career has mirrored the development of the state's unique system for regulating hospitals.

Little observed by the public, the Health Services Cost Review Commission sets the rates that, in aggregate, mean Marylanders pay $10 billion a year in hospital bills.

The commission also has made sure that uninsured patients can get care at any Maryland hospital, recorded one of the lowest rates of hospital bill inflation in the country and generally stabilized the financial condition of hospitals, particularly urban hospitals, by making sure they are reimbursed for caring for those who can't pay.

With agenda items such as "Draft Recommendations on Excess Case Mix Revenue Restoration," commission meetings are hardly crowd pleasers.

But over the past 35 years, Larry Lawrence estimates that he has spent 20 percent of his time at meetings about hospital rate regulation, either at the commission or internally at the hospital association. That would mean 14,000 hours, roughly the amount of classroom time spent from kindergarten through high school.

Dapper, with a mustache and combed-back gray hair, Lawrence has spent many of those hours arguing on behalf of the hospitals, with firmness but with civility.

His first duty ...

"His first duty is advocacy for the industry, and he does that quite well, but he's a big proponent of compromise," said Robert G. Murray, the rate-setting commission's executive director.

Lawrence didn't set out to spend his life debating the uncompensated care regression equation. Born in Western Pennsylvania, he took his first - and only other - job with Calgon. "The bath oil and bubble-bead people," as Lawrence calls the company, assigned him to give technical advice about boiler and cooling systems to large companies and institutions in the Mid-Atlantic area.

Among the facilities he visited were hospitals, and as he observed the administrators, "I thought, `Gee, this seemed like a career that was fast-paced,'" he recalled. He enrolled in a master's program in hospital administration at George Washington University, and the program sent him on an internship to the Maryland Hospital Association.

When he arrived, he said, "Inner-city hospitals were spending down to insolvency," as they struggled to treat the uninsured. At the same time, Maryland hospitals were among the most expensive in the nation, with bills 25 percent above the national average. A hospital association task force recommended setting hospital rates with a modified public utility model; regulators were to make sure hospitals set reasonable charges.

Putting that into practice raised lots of questions, and Larry Lawrence was among those who worked to answer them: How did one define what was reasonable? How did one assure fairness among different types of patients. What kind of data did the state need to collect? Should larger insurers get discounts?

"In the beginning - it sounds biblical, but I don't mean to - there was a big debate between Blue Cross and commercial payers," said Harold A. Cohen, the commission's first executive director. Like Lawrence, Cohen has been involved in some way with the panel's work for the full 35 years. After leaving the commission, he has worked as a consultant to CareFirst BlueCross BlueShield and Kaiser Permanente, representing insurers appearing before the commission.

In the mid-1970s, the commission combed through the books to determine reasonable charges for each hospital. Later, it compared each hospital with its peer group, slowing rate increases at those where charges were well above average.

All along, it has allowed each hospital to build into its rates an amount to cover care for the uninsured - an average of about 8 percent - thus spreading those costs among all insurers and patients.

Early in the commission's work, the federal Medicare program agreed that it, too, would pay state-set rates, including the portion that covers the uninsured - as long as Maryland kept its rate of increase in hospital costs below the national rate.

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