Maryland's secretary of health has proposed a unique and controversial plan to control cost increase at the state's 50 hospitals.
Under Dr. Charles Buck's proposal. the state would set a single limit on the amount Maryland's entire hospital industry could increase its revenues and then hold individual hospitals' operating costs within that overall limit.
Buck's plan, already being attacked as "radical" by industry officials who say it would turn the hospital planning process "inside out," would set an initial statewide ceiling of 10.4 percent - roughly $100 million - on the amount hospitals could increase their revenues each year.
Buck's proposal, still in the initial drafting stage, must win the approval of Maryland's key health planning agency and must be incorporated into the state's federally mandated statewide health plan before it goes into effect.
A knowledgeable source said yesterday that Buck's plan has about a 50-50 chance of success.
Maryland already has what is generally considered that nation's most effective Hospital Cost Review Commission, which last year held the increase in state hospital costs to 9.2 percent, the second lowest in the country.
According to Buck, his plan would be even more effective because it would coordinate the rate-setting and planning functions, now handled independently by the Cost Review Commission and a series of regional health planning agencies around the state.
The key innovation in the Buck plan would be the imposition of an industry-wide hospital cost inflation rate.
This rate would leave individual hospitals the flexibility to increase costs beyond the allowable industry-wide figure, as long as these increase were balanced by correspondingly smaller increases in other hospitals' costs.
At the moment, hospital rate increases are decided by the state commission on a case-by-case basis.
Neither Virginia nor the District of Columbia have anything approaching Maryland's present cost control system.
The new statewide rate in Maryland would be calculated by taking the general state inflation rate, adding one percent to allow for growth in hospital programs and facilities and then add a small percentage for plannings and long-term hospital development.
According to John S. Cook, chief analyst for the Cost Review Commission, the plan would give "the industry two ways to make increased money: One is to reduce the number of patients admitted on an inpatient basis; the other is to close unneeded services and hospitals."
The first method, treating more people on an outpatient basis, would benefit the hospitals because they would be reducing their expenses. The second would be beneficial, he said, because it would mean there would be fewer services and hospitals sharing the total allowable increase.
According to Cook, while Maryland has led the nation in controlling hospital costs, there has been little coordination between present cost control and future planning.
Under the Buck proposal, he said, the two processes would be more closely coordinated, with both planners and cost controllers working under the same industry-wide cost ceiling.
Officals of the Maryland Hospital Association have attacked the plan on several grounds - chiefly that, they believe, it is illegal.
According to an industry spokesman, Buck lacks the authority to impose such a system, which would, the spokesman said, usurp some of the authority of the Cost Control Commission.
Buck has asked the state attorney general for a legal opinion on the proposal.
According to Lary Lawrence, senior vice president of the state's Hospital Association, the Buck plan "is a very radical approach. We would suggest he take a much more traditional approach.
"For the past ten years it has been a principle that because the needs of each community are different," said Lawrence.
"This is a radical plan because it sharply deviates from a bottom-up, community oriented, approach, to a top-down-system that turns the whole system upside down," he said, complaining that the Buck plan sets a statewide cost increase ceiling and then forces planners to approach the community level problems with that ceiling in mind.
"It doesn't make sense to turn the system inside out until you've fully tested the existing system," said Lawrence, who said the present system effectively controls costs.
The Carter Administration's national hospital cost control plan would impose a limit of about 10 percent on cost increases. This ceiling, however, would apply to individual hospitals rather than to the entire industry in a given state.
The Buck plan allow more flexibility on the local level than the present federal plan, because the Buck plan could allow some hospitals to exceed inflation ceiling, as long as the industry average stayed within it.