Just a month after denying Maryland hospitals' request for a rate hike, the seven members of the state's Health Services Cost Review Commission reversed course and unanimously approved a 1.65 percent increase, which goes into effect next month. But this is only a temporary solution to a much larger problem that should be of great concern to all state residents who assume that a fully staffed hospital will always be available when they need it.
The commission usually sets rates for a full year. However, commissioners approved this one only until December, citing continued uncertainty over how the higher rates will affect Maryland's unique Medicare waiver.
Maryland is the only state in the nation that is allowed to regulate its own Medicare rates, which are the same no matter where a patient seeks care. But there's a caveat. In order to maintain the waiver, every three months Maryland health officials have to demonstrate that the average cost of a hospital stay is growing at a slower rate than the rest of the country. That's an increasingly difficult thing to do because the state's success in reducing hospital admissions has raised the average cost of inpatient care.
Maryland hospitals have already been squeezed by Medicare for more than 20 years. Maryland General, which is owned by the University of Maryland, is closing its obstetrics unit on June 30 to save money. Other hospitals in the state are considering other cost-cutting measures, including layoffs, as they collectively grapple with losing up to $8 million a month before the new rates kick in.
In April, the federal sequester reduced their revenues an additional 2 percent. So 42 percent of hospitals in Maryland are already operating with negative profit margins. And that's before the $716 billion in Medicare cuts under Obamacare start going into effect next year.
So even with the modest rate increase that the commission approved, the already razor-thin margins of the state's 35 still-profitable hospitals will slip to minus 0.24, the Maryland Hospital Association warned. The MHA had requested a 2.43 percent rate hike, which would have reduced profits even further but at least kept some medical facilities from going over the edge into red ink. But that didn't happen.
"What good is the waiver if in the process we bankrupt hospitals?" MHA CEO Carmela Coyle asked. It's a very good question, and one for which Maryland citizens should demand an answer.