Will new regulators slow progress on hospital costs?

July 17, 2011|By Jay Hancock

If the nation is ever to get insane health care costs under control, the methods used are likely to be tougher, stronger versions of what's going on in Maryland:

Stop certain hospitals and doctors from enriching themselves with unneeded procedures. Pay the system for keeping people healthy and curing the sick, not for performing tests and surgery. Cap prices by administrative decree and force hospitals to be more efficient.

So the biggest changes in years at Maryland's price-setting agency for hospitals merit the attention of consumers, employers and everybody else.

The Health Services Cost Review Commission can continue pressing providers to reduce waste and stop the spiral that makes American medicine the most expensive system in the world — with mediocre results. Or it can cave in to Maryland's powerful health care industry, ensure that hospital revenues keep soaring, and present patients, employers and taxpayers with the bill.

Commission director Robert Murray, who clashed last year with the Maryland Hospital Association over price increases and presided over a controversial attempt to identify hospitals that might have been implanting unneeded coronary artery stents, resigned July 8 after two decades in the post.

"This is my decision," Murray said in an interview last week. "I had been thinking about doing this for a while."

Having two daughters at Stanford University, which charges $50,000 a year per student, is a good reason to seek employment outside government.

Adding to the change, last week Gov. Martin O'Malley appointed four new members to the seven-member cost commission. The new chairman is John M. Colmers, who probably knows more about Maryland health care policy than anybody.

He once directed the cost commission staff. He was a director for CareFirst BlueCross BlueShield, the state's biggest health insurer. Until January, he was the state's secretary of health and mental hygiene.

"There's no one who's better-positioned to run this board today than John Colmers," said Frederick W. Puddester, who stepped down from the commission chairmanship to take a job at Williams College in Massachusetts. "Much better than Fred Puddester."

Like Puddester until he moved north, Colmers works for Johns Hopkins Medicine, the gigantic hospital system and one of Maryland's largest private employers. In February he signed on as the system's vice president for health care transformation and strategic planning.

Can Colmers be an effective hospital-cost cop when his decisions could mean a difference of millions of dollars in revenue for his employer?

"Come on, Jay. What kind of question is that?" he said when I asked him. "You want me to answer 'no'?"

The panel has always included hospital executives, sometimes as chairmen. But representatives of health care providers can't account for more than three of the seven seats.

"There are good examples of where provider-related chairs and commissioners can function exceptionally well," Colmers said. "It's just a question of being mindful of where those conflicts are."

Puddester was chairman for only a year, succeeding Dr. Donald Young. The new commission has two hospital executives, a doctor, a health insurance executive, a health industry consultant and two economists. What it badly lacks is representation from the sector that pays a huge portion of the expense: Maryland business.

Why is there no human resources professional or another corporate executive on the panel? Raymond Brusca, vice president of compensation and benefits for Stanley Black & Decker, stepped down more than a year ago, and nobody of a similar background has replaced him.

"We look at the individual's expertise, not the category," said Raquel Guillory, O'Malley's spokeswoman.

Besides, she said, Mercy Health Services CEO Thomas R. Mullen, appointed to the board last week, "is certainly, in our view, a business person."

He is, and a fine one. But given that the committee's job is to control medical costs, it needs more people who pay health care bills and fewer people who send them out. Mullen is among the latter.

Maryland's system is unique in the nation and valuable. The commission sets the same rates for everybody: Medicare, CareFirst and so forth. That stops hospitals from shifting billions in costs to the employers that pay insurance premiums. The cost of uncompensated care for the poor is borne by everybody, not just urban hospitals.

Last year, Carmela Coyle, president of the Maryland Hospital Association, said she was "very disappointed" with the rate increase and threatened that hospitals might lay off employees.

Coyle had complained about Murray in a letter to the commission a few months earlier, saying hospitals' relationship with him was "fundamentally broken."

Somehow hospitals survived. Meanwhile, the annual increase in regulated hospital spending in Maryland plunged from 8.2 percent in fiscal 2007 to 1.9 percent in fiscal 2010. Besides leading the inquiry into heart stents, the commission has moved to reduce repeat admissions as well as expensive one-night admissions for mildly ill patients who don't need to be in the hospital.

Its "total patient revenue" pilot projects, which encourage cost cutting by paying hospitals fixed amounts rather than fees based on admissions and procedures, are ahead of similar federal efforts.

"The challenges for the system are daunting," Colmers says, and he's not talking about just Maryland.

Health care is a national political hurricane. If the Health Services Cost Review Commission can't tame expenses in one of Maryland's most powerful industries, somebody else will.


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