Hospital rate freeze sought; Industry group acts to forestall proposal to require cut of 6%


Faced with action by regulators that would cut hospital rates, the Maryland Hospital Association is proposing instead a one-year freeze on rates, Calvin M. Pierson, the association's president, said yesterday.

Pierson said a proposal by the state Health Services Cost Review Commission to reduce the cost of an average hospital stay in Maryland by 6 percent over 2 1/2 years, was "totally unacceptable, in our view."

Such deep cuts, he said, could mean "thousands of hospital employees laid off" (Maryland hospitals employ about 75,000, according to the association) and "diminished care."

However, Pierson said, hospitals recognize the need to hold costs down. He said he was optimistic the association and the rate-setting commission could reach agreement on both a plan to control costs over the next year and on a plan to simplify the rate-setting system.

"The issue is not a major difference about the problem, but how severe the solution should be," Pierson said.

Robert Murray, executive director of the cost review commission, said the association's approach "has some merit." However, he continued, a freeze would mean Maryland's cost per case would remain above the national average, and "that's not good enough -- the commission wants to get below."

Under proposals being considered by the commission, Murray estimated, Maryland hospitals could face an across-the-board rate cut of 1 percent in April, and further cuts of about 2 1/2 percent by 2001. In addition, he said, hospitals with costs significantly above average would undergo additional reductions.

The commission is also considering quarterly reviews and, if necessary, "taking money out of the system until we get on a trajectory to achieve our goal." Murray said cost efficiencies achieved by hospitals in other states convinced him that Maryland could reduce rates without damaging the quality of care.

The commission is expected to decide at its meeting in March how to adjust its formulas for the next year.

From 1976, when the commission began setting rates, Maryland went from 25 percent above the national average cost to 13 percent below in 1992.

Since then, however, Maryland costs have grown faster than the national rate for six straight years, and the cost of an average hospital stay in Maryland now is about 3 percent above the national average. That is what prompted the commission to adjust its formulas to bring costs down.

Pierson and Murray said the freeze proposal was floated last week at an informal meeting with some commission members and at a meeting of a commission task force.

Pub Date: 1/13/99

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