Agency raises hospital rates Intent is to spread cost of treating state's uninsured


The state's hospital rate-setting commission yesterday approved a plan to spread the $400 million-a-year cost of caring for the uninsured more evenly among all hospitals in the state, a move that should better position urban hospitals to compete for managed-care business.

The Health Services Cost Review Commission voted to increase the rates for all hospitals by three-quarters of 1 percent, to create a fund for the hospitals that provide a disproportionate amount of care for Marylanders who lack health insurance.

The commission also approved an additional increase of up to half of 1 percent to give grants to hospitals for innovative ways of caring for the uninsured.

The plan would result in slight rate increases at most hospitals in the state, but a rate decrease at the urban hospitals that provide most charity care. Overall, health costs in the state would not increase.

The plan "is more equitable for those bearing the greatest burden," Calvin Pierson, president of the Maryland Hospital Association, told the commission.

Under the commission's 20-year-old rate-setting system, each hospital has built the cost of charity care and bad debt into its rates. All payers -- Medicare, Medicaid, Blue Cross Blue Shield and private insurers -- pay those rates, in effect subsidizing care for the uninsured.

While hospitals in some other states turned away uninsured patients, nearly everyone in Maryland was happy with the system -- until managed-care insurers began shopping for the best prices. Urban hospitals, with higher rates to cover more charity care, were afraid they would lose business to lower-cost suburban competitors. The state has been grappling for several years to modify its rate-setting system.

Under the plan approved yesterday, the seven hospitals in the state with above-average charity care -- Bon Secours, Johns Hopkins, Johns Hopkins Bayview, Liberty, Maryland General, Prince George's General and University of Maryland -- will benefit from the subsidy. This will allow rate reductions -- Liberty's, at 5.7 percent, would be the largest -- that could make the urban hospitals better able to compete for managed-care contracts.

The plan represents a compromise; some urban hospitals sought a larger subsidy, while some suburban and rural ones did not want to raise their own rates.

Despite the hospital association's endorsement, the plan was criticized by Blue Cross Blue Shield and the Maryland Association of Health Maintenance Organizations (MAHMO), which will pay the higher rates at most hospitals.

Deron Johnson, legislative analyst for MAHMO, told the commission the plan represents "a hidden tax that goes to seven urban hospitals."

But the plan won endorsement from groups concerned about care for the poor. George Benjamin, deputy state health secretary, praised the plan to offer grants for preventive care. "If we spend $600 on prenatal care," he said, "we can save $2,000 to $3,000 in hospitalization."

Robert Murray, executive director of the commission, said it would probably take until early next year to develop regulations, get them approved, and put the plan into effect.

Pub Date: 9/05/96

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