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State panel to consider increases in hospital rates

Maryland hospitals want health regulators to approve a larger increase in hospital rates than the one proposed by state health staff when they vote Wednesday on rates for the next fiscal year.

Rates for hospitals in Maryland are tightly managed as part of a unique agreement the state has with the federal government to control health care spending.

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Hospitals say securing an adequate increase from the Maryland Health Services Cost Review Commission is more important now as they are in the midst of a transformation in the way they deliver health care. With the goal of keeping patients healthy and out of the hospital and delivering care in less costly ways, the commission began capping hospitals' overall budgets in 2014 in addition to controlling rates they charge patients, which the commission has done for decades.

For the year beginning July 1, the commission's staff proposed an increase of 2.16 percent, but hospitals say they need more: 3.27 percent.

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"This too-low staff-proposed update is simply not enough to support the forward momentum that hospitals and the state have been building over the past two years," said Carmela Coyle, president and CEO of the Maryland Hospital Association. "It jeopardizes hospitals' ability to meet current costs like wage increases as well as the progress made to improve the health of entire communities. Pulling back now calls into question the viability of the modernized all-payer model."

The hospitals further note that the proposed increase is inflated to cover the costs of services for unanticipated new patients. Removing that, the state's proposed increase is 1.63 percent. Hospital officials want that increased to 2.75 percent.

Individual hospitals also said the higher rates still were needed for changes to the way they deliver care, including their facilities, though such expenses have been included in past increases.

Hospitals have been pushing patients to less expensive outpatient centers for surgery and rehabilitation. Other programs ensure that patients are seeing primary care doctors to manage conditions so they avoid unnecessary emergency visits.

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"To be able to invest in tomorrow, we need to make sure we're not short selling ourselves today," said Keith Vander Kolk, president and CEO of Saint Agnes Health System.

The rates are the same for every patient and their public and private insurers at a particular hospital. The rates, however, vary from hospital to hospital depending on factors that include the hospitals' level of unpaid bills and the complexity of the patients' treatments.

The U.S. Centers for Medicare and Medicaid Services signed off on the five-year agreement with Maryland beginning in 2014 that requires higher federal reimbursement for those programs in exchange for keeping the state's annual health care spending growth below 3.58 percent, which reflects the Maryland's average economic growth, plus $330 million in Medicare savings.

The model is being closely watched by federal regulators, who have said if it's successful it could serve as a model for controlling health care costs other states.

Steve Ports, a spokesman for the Health Services Cost Review Commission, said the staff "believes there should be caution in allowing for an update higher than 2.16 percent" for the coming year to ensure that health care spending by hospitals doesn't violate the agreement.

He said the commission's staff plans to continue monitoring the effect on hospital budgets and will evaluate the need for more revenue in the second half of the fiscal year, beginning in January.

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