A story in yesterday's Washington Post erroneously reported that Shady Grove Adventist Hospital in Gaithersburg will have the highest rates in Montgomery County when it opens in November. The Maryland Cost Review Commission confirmed yesterday that Montgomery General Hospital in Olney was granted an increase July 1 that permits it to change $141.81 a day for room and board, $15.81 more than the tentative rate set for Shady Grove.
The financially troubled Shady Grove Adventist Hospital will be able to open in November after working out an arrangement that will give it the highest rates in Montgomery County and a $1.1 million annual subsidy from a sister hospital.Shady Grove officials say.
The hospital's financial experts had suggested the new facility might never open its doors because it faced the prospect of losing $5 million in its first two years operating with only half its beds filled.
But the Maryland Cost Review Commission has agreed to a proposal that would increase the Gaithersburg hospital's room rate and reduce rates at Washington Adventist Hospital in Takoma Park.
Shady Grove had asked the commission to let it charge rates that would make up for the low occupancy rate and unexpectedly high construction and equipment costs.
The new rates are not yet official, but commission of rate analyst Dennis Phelps said the state is willing to permit Shady Grove to charge $126 a day for room and board. That is $4 more than the highest priced hospital in the country, Montgomery General, is charging now, but considerably less than what most Prince George's County hospitals charge.
In order for Shady Grove to get approval for the higher rates, Washington Adventist agreed to take a rate cut, Phelps said. The amount of that cut has not yet been decided, but Phelps said the commission will probably require Washington Adventist to drop its $109 room rate about $4.
Charley Eldridge, president of both hospitals, said Washington Adventist would absorb the loss in revenue by transferring some of its nonmedical staff to Shady Grove.
By sharing staff, the two hospitals can save $1.7 million a year, he said.
That is the same amount Shady Grove officials originally told state planners they would save through service sharing. But after they had received certification to build the hospital, the officials said sharing would not be possible.
The cost review commission told Shady Grove earlier this month, however, that the rates it set would reflect the projected savings, even if they couldn't be realized.
Shady Grove still expects to lose about $1 million in its first two years, Eldridge said. But he said he hopes the hospital "can survive with these rates.
"It's going to be how efficiently their management operates that determines how much money they lose."