Maryland hospitals are gearing up to challenge state rate-setters' efforts to squeeze hospital rates by nearly 4 percent.
The rate squeeze was triggered by a formula designed to make sure Maryland's hospital costs don't increase at a faster rate than the national average. This past year, Maryland costs grew by 4.5 percent, about double the national rate, while hospital profits reached record levels.
The "correction factor," which began taking effect this month, doesn't mean every hospital will see its rates cut -- in fact, the Maryland Hospital Association estimated about half will get an increase. But a hospital that would have gotten a 6 percent increase under the old formula, which accounts for inflation and other factors, will get "corrected" to a 2-percent increase.
"We don't think Maryland can be held hostage to the national rate of growth, because it doesn't reflect what's happening here," said Peter Parvis, a lawyer representing a new ad hoc group of hospitals opposing the adjustment factor. "You can't punish an entire industry without a lot more study."
"We really do believe the health-care system has always managed to reach a reasonable solution, but if we can't achieve a reasonable solution, we'd have no choice but to litigate," he continued.
Parvis said about two-thirds of Maryland's 50 hospitals have agreed to join the new group, the Maryland Hospital Coalition. He said the organization grew from a "spontaneous eruption of people saying, 'Why are we accepting this?' "
Hospitals opposed imposition of the correction factor at a meeting last month of the Health Services Cost Review Commission (HSCRC), which sets hospital rates in Maryland. But insurers and others said the adjustment was needed, and the commission allowed it to go into effect.
Parvis said hospitals are working now to estimate the impact, but that it is not possible to say which services might be cut back at which hospitals. Overall, he said, the hospitals would probably reduce some staff and trim operations, such as well-baby care for the uninsured, outside of "core services." Hospitals cannot refuse to admit uninsured patients who need care.
Parvis and a number of hospital administrators met this week with Robert Murray, executive director of HSCRC. The hospital group plans to appear before the commission at its May meeting, seeking a moratorium on the correction factor until September and a fuller hearing on the issue.
Murray said the HSCRC staff believes the correction is appropriate -- "We want a formula that tracks the nation" -- but would be willing to listen to further arguments from the hospitals.
Parvis said a systemwide correction was not needed because the HSCRC has the authority to review any hospital it believes is overcharging or posting excessive profits.
He said it was not the intention of the group to try to end state rate regulation, which has generally been supported by the hospitals. HMOs and others have said Maryland should end state rate-setting, allowing rates to be set by a free market.
Pub Date: 4/25/97