Maryland's Cost Review Commission Helps Rein in Hospital Costs

Tags: charity care | hospitals | insurance | Maryland | Medicare | reimbursements

Maryland's system for setting hospital rates could serve as a model the federal government as it tries to rein in healthcare costs but could lead to more regulation for healthcare providers, according to a report in the Wall Street Journal.

Established in 1977, the Maryland Health Services Cost Review Commission sets the rate for all patients, including Medicare beneficiaries, privately insured patients and the uninsured, at all of the state's acute-care hospitals. According to the report, the commission has helped to bring Maryland's hospital costs below the national average and help hospitals maintain a steady profit margin, with the average margins falling between 2.5 and 3 percent.

Medicare and Medicaid do pay higher rates under the system, and under an agreement with the federal government, a subsidy to cover charity care is included in the state-established rates. However, hospitals cannot charge private insurers higher rates to make up for losses in treating Medicaid or Medicare patients, as is the case in other states, according to the report.

The commission also takes into account each hospital's charity care, wages and the severity of patient illnesses when setting rates. Hospitals are required to submit data to the state that covers everything from a patient's diagnosis, demographic information and treatments to how much the patient was billed, and this information is then made public, according to the report.

The system has largely kept charges in check, and in 2007, Maryland hospitals were 2 percent less than the national average. Additionally, Maryland hospitals only charged patients 20 percent above the cost to treat them, compared with the national average in 2007 over 182 percent, according to the report.

Critics of the system say that most conversations regarding payments occur in private and are only presented at one or two public meetings. Appeals to the payment system can only be made to the commission or in court, according to the report. Also, critics say that the commission does not take into account all physician costs to hospitals and lacks flexibility.

Read the WSJ's report about Maryland's hospital rate setting program.

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