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Hospitals seem to think cost-cutting is for everybody but them

In the worst economy in decades, as companies and families downsize and economize, one Maryland industry wants to keep doing business like it's 2007. And it wants you to foot the bill.

The Maryland Hospital Association disliked the raise it got this month from regulators. The figures are complex, but the upshot is that hospitals will collect, on average, 3.29 percent more per patient visit for the fiscal year ending in June 2011. Guaranteed.

Hospitals are "very disappointed," MHA chief Carmela Coyle said in a canned statement. They're also "concerned," she said. Maryland "was not well-served."

Maryland's very economy seems to be at stake.

"I'm not threatening anybody about layoffs, but I'm just telling you that that rate decision has got a lot of hospital people right now going back at their budgets looking at 'How can I make this work?' " Robert A. Chrencik, chief executive of the University of Maryland Medical System, told a few Baltimore Sun editors and reporters last week. "It's a real problem in a year when you've got 7-plus percent unemployment in this state."

Ladies and gents, see the Eighth Wonder of the World: An industry that wants immunity from cost-cutting.

The miserable economy puts pressure on everybody's ability to pay for everything, including health care. But medicine, the business that's eating larger and larger pieces of the American economy, doesn't want to slow down for somebody else's recession.

Costs for nurses and managers are going up, hospitals complain. Energy and malpractice insurance are more expensive. What can they possibly do?

"There are now two years in a row where we are actually losing money on the patients we treat," Coyle said in an interview. "We are being paid less than the cost of care."

Hmm, doesn't Maryland have several respected business schools? Maybe they know what to do when expenses grow faster than sales. Or check with almost any company.

Maryland retailers have suffered year-over-year sales declines of 4 percent or more, according to tax records, but I haven't heard them asking for a bailout from regulators. The average price of a Maryland new car is up only 1.5 percent so far this year, but somehow most dealers are adjusting, staying in business and making money.

But hospitals aren't Walmart or a Chevrolet dealer, Coyle objects. They save lives. They can't slash payrolls or furlough people without threatening the quality of care. They have to stay open in snowstorms even when revenue doesn't come in.

"We don't have the flexibility that other sectors of the economy may have," she said.

Maybe not, but they're more flexible than they pretend.

Hospitals have been largely absent from the efficiency revolution driving the U.S. economy. They're late to electronic records. They're behind on using computers to manage equipment and supplies. They have too many managers. Their marketing and "physician support" budgets are too big.

And in Maryland, hospital productivity has been eroding compared with that of hospitals nationwide, according to figures from the American Hospital Association.

Which shouldn't be much of a surprise. Virtually all Maryland hospitals are not-for-profit, which means there are no shareholders pressing for cost control. Maryland's unique agency, the Health Services Cost Review Commission, raises hospital prices every year. A growing and aging population means Maryland hospitals also keep doing more procedures, which increases revenue even more.

Hospitals use the growing money pile to hire people and build fancy wings, which raises costs and shrinks operating margins, giving them a great excuse to lobby for even more price increases.

Which are passed on to you.

Even if you never get sick, you're paying for Maryland's hospital and health care inflation. Through expensive insurance, of course. But also through taxes for the out-of-control Medicare and Medicaid programs. Blame your crummy raise on medical costs, too. Employers keep diverting money from wages and salaries to pay their share of soaring health bills.

Hospitals blame medical inflation on insurers such as CareFirst BlueCross BlueShield, not themselves. This is like blaming gas stations for the wholesale price of petroleum.

Hospitals point out that they don't get to keep all of the 3.29 percent rate increase approved by the cost-review commission, which is small consolation to the people who have to pay it. Part is passed directly to Medicaid, and hospitals must pay an additional piece to Medicaid to cover a shortfall from the state. Hospitals say they're really getting only a 2 percent raise. They had requested 2.97 percent but reduced that to 2.44 percent after negotiating with insurers.

But when you combine the increased price per patient in the package approved by the cost commission with an expected increase in the number of patients, Maryland hospitals are looking at a 4.4 percent revenue increase at a time when the Consumer Price Index this year is negative.

Arguing over percentage points, however, is to obscure the larger issue: Hospitals are fiercely objecting to a modest effort to contain the medical costs that threaten private and public budgets. If they really cared about the Maryland economy, they would deliver cheaper, better care, and leave struggling companies more dollars to hire the unemployed.

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