Mid-Atlantic Health Law TOPICS

Late spring, early summer is always a busy season at Maryland's Health Services Cost Review Commission (HSCRC), and that was especially the case this year.

In April, the HSCRC assessed all Maryland hospitals $123 Million in the aggregate to help fund the projected budget deficit for Maryland's Medicaid Program. Simultaneously, however, the HSCRC allowed the hospitals to raise their rates, effective July 1, 2010, by 70% of the assessment, meaning that the hospitals would bear 30% of the burden of the assessment, while those who pay for hospital services, such as insurance companies and private individuals, would bear 70% of the assessment.

In May, the HSCRC eliminated the incentive for hospitals to admit a patient, instead of observing that patient at the hospital for several hours without admitting the patient. Previously, every time a hospital admitted a patient, the total amount it could charge to all patients was increased by one times that hospital's average case rate target.

In other words, if a hospital's average case rate target were $10,000 per admission, then each time the hospital admitted a patient for a one day stay and charged that patient $5,000, the hospital also created another $5,000 of headroom that the hospital could charge other patients without running afoul of the hospital's charge per case constraint. To correct that problem, all one day stay cases were removed from the computation of each hospital's charge per case target.

In June, the HSCRC decided that hospitals that were early adopters of observation, as opposed to admitting patients for a one day stay, could raise their rates generally by $29 Million in the aggregate, beginning July 1, 2010, which $29 Million would be funded out of revenue that hospitals could have earned, but did not earn, because the severity of hospital cases did not increase as much as expected during the year ending June 30, 2010.

Finally, in July, the HSCRC adopted a 2% general update to hospital rates, effective July 1, 2010. However, the HSCRC also adopted a more aggressive than normal scaling mechanism, resulting in some low cost hospitals being permitted to charge as much as 1.75% more than the 2% general update, and some high cost hospitals being required to charge as much as 1.26% less than the 2% general update.