Time to Redo the HSCRC
By William R. Brody

Maryland has been a pioneer in regulating hospital rates through a state agency known as the Maryland Health Services Cost Review Commission. Introduced in the 1970s when Maryland had the second highest hospital costs in the nation, the HSCRC was a vehicle to set rates for hospitals and to gradually ratchet down costs. As a result, the state's hospitals moved from near the most costly to among the more cost-effective hospitals in the nation. One of the unique, and I believe most important, features of the HSCRC is the "all payer" nature of our state. Rather than requiring hospitals to shift the costs of the uninsured to a diminishing group of commercial payers, the HSCRC requires all payers to pay the same rates, effectively eliminating discounting and spreading the cost of the uninsured over many payers.

However, over the past decade with the cost-containing managed care initiatives, other states have narrowed the gap, and we now face the potential elimination of the waiver that allows Maryland to be exempt from the Medicare DRG reimbursement structure. More importantly, after decades of cost-cutting, further cuts in hospitals are adversely impacting quality, including significant reduction in nursing staffing.

A new vision for the HSCRC is required, and there is again an opportunity for Maryland to be a leader in developing an equitable and rational system for hospital-based care delivery.

My proposal: Rename the HSCRC the HSQRC-that's Health Services Quality (emphasis mine) Review Commission-to shift the emphasis from cost containment to quality enhancement. Continued reductions in cost only produce unwanted effects on quality. However, a focus on quality will not only improve significantly the services hospitals provide, but will actually work to bring aggregate hospital costs down substantially.

Consider the following: Every adverse event in the hospital stay of a patient, such as a medication error, infection or other complication, generally leads to higher costs. It means a longer stay and more need for diagnosis or therapy that would otherwise be unnecessary, to say nothing of the added morbidity and mortality that affect patients and their families.

We already know that simple changes in hospital protocols and procedures-like making sure patients receive appropriate and agreed-upon treatment regimens-will reduce complications, length of stay-and costs. But currently, our hospitals are not focused on the necessary quality initiatives that produce desired outcomes.

The new HSQRC could effect changes in a relatively simple fashion, not unlike the methodology the old HSCRC has used for cost containment. It could:

Enlist a group of physicians, nurses and public health professionals to develop a set of quality metrics by which hospitals will be measured. Such metrics could include the number of medication errors, infection rates, morbidity and mortality by diagnosis, etc.

Require mandatory reporting of results in a standardized format.

Promote transparency that allows comparison of individual hospital results to the statewide average (after appropriate corrections).

Adopt hospital rate reimbursement schemes that penalize hospitals that perform poorly on the quality index and reward those that do well.

Cap the limit on malpractice awards and eliminate damages for pain and suffering.

Adopt a "no-fault" reporting of medical errors so that individual doctors and nurses have incentives to identify errors as results of a faulty system and not necessarily a mistake by an individual.

I believe this new vision could again make Maryland hospitals among the least costly in the nation. More importantly, they would rapidly achieve the highest quality.

CHANGE
October 23, 2002
Volume 6, Number 17