Rates for hospital visits will change only slightly in the coming fiscal year, with inpatient costs decreasing by 1 percent while outpatient costs rise by 2.59 percent.
The Maryland Health Services Cost Review Commission, which sets state hospital rates for all payers in the state, including private health insurance providers, Medicare and Medicaid, adopted the new cost figures Wednesday.
The rate increases were necessary to help hospitals keep up with growing costs due to inflation, said Jim Reiter, spokesman for the Maryland Hospital Association. Maryland hospitals have gone several years with overall rate hikes that are less than their cost increases, Reiter said.
“It’s a bad time for hospital finances,” Reiter said.
Commission staff initially proposed an overall rate freeze for the coming fiscal year, but instead adopted a plan proposed by the hospital association.
Commission staff could not be reached for comment before deadline.
The new rates will go into effect July 1.
Since inpatient care accounts for a greater share of hospital visits than outpatient care, the changes amount to an overall increase in hospital rates of 0.3 percent, Reiter said.
But the commission system means Medicare pays higher rates in Maryland than in other states, an arrangement that federal officials have agreed to as long as Maryland’s patient care costs don’t increase more than national Medicare costs do. That test no longer reflects the changing costs of health care, Reiter said.
The 1 percent decrease in inpatient care rates was intended to provide a “cushion” to protect the Medicare agreement until federal and state officials can refine the system, Reiter said.
Maryland is the only state that uses a rate-setting commission. The seven-member independent panel, appointed by the governor, was established in the 1970s with the goal of keeping hospital rates reasonable and equitable for all patients.
Changing the hospital rates is just a short-term solution, said Joshua Sharfstein, secretary of the state Department of Health and Mental Hygiene.
“We have to change the way we pay for health care,” he said. “It can’t just be that the more health care you deliver, the more you get paid, because then prices just keep going up and up and up.”
The state needed to implement more policies such as a program that charges patients by the medical episode, rather than by the specific hospital visit, Sharfstein said. Under this system, patients are not charged if they need to be readmitted to a hospital for treatment within 30 days, putting more of an incentive on keeping the patient healthy and out of the hospital, he said.
“We have to be able to pay on the basis of good outcomes, Sharfstein said. “As that starts to happen, we’ll do better for costs in Maryland.”