Hospital Costs

John M. Colmers, chief administrator of Maryland's hospital rate-setting commission, was appointed yesterday acting executive director of the state's powerful new Health Care Access and Cost Commission.The move, announced by Gov. William Donald Schaefer, is designed to tap the expertise of an agency credited with leading the nation in controlling hospital costs.The appointment immediately got high marks from those who know or have worked with Mr. Colmers."I'm not sure they could have gotten a better person," said state Sen. Thomas P. O'Reilly, the Prince George's County Democrat who chairs the Senate Finance Committee, which helped draft the legislation creating the new commission.

Has the Maryland hospital regulatory system outlived its usefulness? Is Maryland the leader or the laggard of health reform? Those are the questions the state's business leaders are asking these days. With good reason:* For the first time in 18 years, Maryland hospital costs rose faster than the national average in 1993.* At the same time, Maryland hospitals earned record profits on declining admissions.* At least two hospitals in the past two months asked for and received permission to lower their prices.

Helped by a surprising dip in spending on charity care, Maryland hospitals rang up record operating profits of $167 million in 1994 and kept their average cost increases below 3 percent, state officials reported yesterday.Although the report of low cost increases is welcome news for employers and consumers seeking relief from rising medical bills, some employers said Maryland hospitals could be even more efficient.The average cost of a stay at one of Maryland's 51 acute-care hospitals rose to $5,601, a 2.8 percent increase that was the smallest since the state began tracking this information in 1978.

The state's HMO trade group told hospital rate-setters yesterday that they do not have legal authority to craft a "political compromise" on a plan to squeeze hospital rates.David M. Funk, a lawyer for the Maryland Association of Health Maintenance Organizations, said at a public hearing before the Health Services Cost Review Commission that it must go ahead with a plan to reduce hospital rates by nearly 4 percent, since the law creating the commission requires it to keep hospital costs reasonable.

House Speaker Casper R. Taylor Jr. said yesterday that he plans to convene a "legislative retreat" in the fall to consider health regulatory reform.In addition to being attended by key legislative leaders, he said, the meeting would include representatives from the state hospital association, the state medical society, the health maintenance organization industry and other interest groups.A Taylor-backed regulatory reform bill attracted wide support in the last legislative session but stalled at the end amid disputes over details.

IS IT A CASE of bureaucracy run amok? Or special interests trying to evade regulatory cost controls?Either way, the current dispute between Maryland hospitals and the state's rate-setting commission illustrates the difficulty of state government trying to regulate one segment of a fast-changing, market-driven industry.Maryland stands alone in trying to control hospital costs through a rate-setting commission. A separate planning commission must approve all hospital expansions. A third commission is developing a health-cost data base.

The chief executive of Blue Cross and Blue Shield of Maryland yesterday defended his company against charges of arbitrary claims denials and said the claims dispute is a distraction from the real problem -- that Maryland hospital costs are too high."

ABOUT 220 YEARS after Adam Smith, the father of modern economics, described the powers of the free market, we still have a long way to go to emancipate the free market economy in Maryland from the interfering hand of state regulation.Well-intentioned lawmakers in Maryland remain convinced that they can achieve higher quality, more affordable and more efficient health care through regulation than by trusting the marketplace. Given the dramatic changes occurring in the health care industry, an in-depth public discussion on how much regulation is enough is long overdue.

ST. AGNES HOSPITAL, long known for going the extra mile for patients, found itself a winner of a marketing ploy -- a second day free for new mothers whose insurance might turn them out after 24 hours. Considering the black eye insurers are giving themselves on this issue, a hospital willing to take a hit on its bottom line to give minimally decent care to mothers and infants may end up attracting more revenue in new patients than it loses in offering the free day.Unfortunately, the offer has attracted the ire of state regulators -- the same folks who have done an admirable job of keeping the growth in hospital costs far below that of other states.