With hospital charges across the country rising faster than expected, Maryland's average hospital bill has fallen further behind the national average than had been projected - creating a multimillion-dollar dilemma for the Health Services Cost Review Commission, the state rate-setting panel.
Hospitals say Maryland rates can rise slightly faster than national rates for the next two fiscal years and still meet the commission's target of keeping hospital costs below the national average.
The commission's staff, backed by insurers, argue that hospitals will still be more profitable than today, even if rates should rise at a slower pace.
All sides agree that the difference between the commission staff's proposal and the hospitals' involves tens of millions of dollars. To the hospitals, it is revenue gained or lost. To the patients and their insurers, it is higher or lower hospital bills.
At yesterday's meeting, commission executive director Robert B. Murray pegged the difference between the two proposals at $150 million or more over the next two years. The Maryland Hospital Association estimated the difference would be about $70 million.
The extra cost to the state's Medicaid program alone - like other insurers, Medicaid pays the state-set hospital rates - will be $23 million over two years, Kevin Criswell, assistant vice president of finance of Amerigroup Maryland Inc, a Medicaid HMO, told the commission.
The commission likely will decide on the guidelines for new hospital rates next month.
According to Murray, the staff's recommendation would likely mean 5.65 percent increases in hospital rates in each of the next two fiscal years, while the hospital association's recommendation would mean rate increases of 6.41 percent.
Paul Sokolowski, senior vice president for finance for the hospital association, said he believed the difference wasn't that large, but that he hadn't yet had time to review Murray's calculations, which were first presented at yesterday's meeting.
The faster-than-expected national increase reopens a discussion that seemed settled in April. The commission decided then that Maryland's hospital bills should grow more slowly than the national average over a three-year period so Maryland would end up 3.1 percent below the national benchmark.
But that decision was made when the commission thought Maryland was 2 percent behind the national average. New data show Maryland is actually 3.4 percent behind (although Murray said there should be an adjustment reflecting a shift from inpatient to outpatient care, making 2.4 percent a more accurate number).
Both sides say their plans follow the April decision: Hospitals want to keep the 3.1-percent-below goal; Murray and the insurers want to retain the slower-than-national-growth goal.
"Maryland hospitals are experiencing the same cost pressures as the rest of the nation," Kevin Kelbly, chief financial officer of Carroll Hospital Center, told the commission. "Can we afford to be that different from the nation?"
Kelbly and other hospital finance officials said hospitals require additional revenue because of staff shortages, information technology and building projects.
But Harold A. Cohen, a consultant representing insurers CareFirst BlueCross BlueShield and Kaiser Permanente, said, "It's appropriate for this commission to say, `If the nation is becoming unaffordable, we don't need to be unaffordable, too.'"