In a sign of increasing strain on Maryland hospitals, the state's rate-setting panel approved temporary increases yesterday for two financially troubled institutions, Upper Chesapeake Medical Center in Bel Air and Prince George's Hospital Center in Cheverly.
Also, the Maryland Hospital Association asked the Health Services Cost Review Commission for an additional statewide rate increase - above the adjustment approved just a month ago - for the fiscal year beginning in July.
The commission's staff responded by calling for an added 0.4 percent, targeted to the most needy hospitals, rather than across the board. The commission deferred action until its meeting next month.
Dean Farley, the commission's vice chairman, said the panel was seeking to balance the need to control costs against concerns for the hospitals' fiscal health.
Both Upper Chesapeake, which got a 5.7 percent temporary increase, and Prince George's, which got 3.7 percent, will undergo fuller rate reviews over the next few months, and their rates could be adjusted again based on more data.
About half a dozen other hospitals also are awaiting rate reviews, in which they seek to justify higher increases than the statewide inflation adjustment. Johns Hopkins got a temporary rate increase last month.
"Eight rate appeals," exclaimed Larry Lawrence, a longtime vice president of the Maryland Hospital Association. "I don't ever remember - in 30 years - having eight rate appeals at the same time."
Lawrence said the volume of appeals showed "a shortfall in the system," justifying higher statewide rates. The state has 52 hospitals.
At yesterday's meeting, executives of Upper Chesapeake and Prince George's told the commission that their unique circumstances dictated the increases. Those factors go beyond those affecting all Maryland hospitals - such as higher pay to cope with a shortage of nurses and escalating costs for pharmaceuticals and blood.
Both also said they were attempting to cut costs as well as increase prices.
Without an increase in revenue by June 30, the hospital would be in technical default on its bond agreements, said Winfield M. Kelly Jr., president and chief executive officer of Dimensions Healthcare System, parent of Prince George's Hospital Center.
Although the hospital would continue to make payments on its bonds, it would be unable to maintain its agreed-upon ratio of cash flow to indebtedness, he said.
Such a technical default, Kelly said, would give bondholders the right to order cost controls, which could result in cutting money-losing programs important to the community.
"The mission of the bondholders is to get their money back. They don't have the requirement to care for the people," Kelly said.
He said the hospital was losing money - $15.8 million in the fiscal year that ended June 30 and a projected $10.6 million this year, even with a $3 million subsidy from the county.
In large measure, he blamed the losses on a rising number of uninsured patients, on HMOs denying a higher percentage of Medicaid claims, and on the hospital supplementing the low Medicaid rates paid to doctors.
In addition, Kelly said, the recent closing of services at District of Columbia General Hospital was bringing Prince George's more uninsured patients.
Upper Chesapeake said it had extraordinary costs connected with opening its new Bel Air hospitalChief Executive Officer Lyle Sheldon told the commissioners that a higher-than-expected patient volume had led the hospital to hire expensive agency nurses. It projects a $16.4 million loss this fiscal year.