On the fourth floor of Calvert Memorial Hospital, the nursing station bristles with new equipment, the starched sheets are turned down in the private rooms and the supply closets are stocked with all the paraphernalia of a modern medical facility.
Constructed as part of a $3.5 million expansion that opened last year, the fourth floor of Calvert Memorial lacks only one thing: patients.
Not many years ago, the occupancy rate at the Southern Maryland hospital was high enough that patients were occasionally bedded down in hallways.
Yet today, administrator Constance Row struggles to fill more than 60 percent of the hospital's 157 beds. Last December, less than a year after completion of the hospital expansion project, she reluctantly shut down the 33 new beds on the fourth floor and laid off 45 employes.
The silent halls of Calvert Memorial symbolize fundamental changes sweeping through the health care industry in Maryland and the nation. At least 20 states are now studying whether to set up rate-setting structures similar to that established in Maryland in 1977.
Maryland is proposing to go even further to curb rising health care costs by scaling back a bloated hospital industry. Seven bills introduced by Gov. Harry Hughes, which will be debated for the first time this week before a House committee, would freeze hospital expansion and cap hospital revenue, among other things. The eventual result will almost inevitably be hospital closings, probably in Baltimore where the bulk of the state's excess beds are.
Hospitals in other jurisdictions are watching carefully what happens in the legislature over the next two months. Maryland is "a kind of a laboratory for us to learn from," said Cheree Cleghorn, vice president for public affairs for the Washington Hospital Center.
The linchpin of Maryland's regulatory framework is its longstanding exemption from federal Medicare rates. The new legislation is designed to preserve that exemption by giving regulators the tools to shrink an estimated surplus of 4,100 hospital beds.
The legislation grew out of the efforts of a gubernatorial task force and enjoys broad support. Legislative leaders are solidly behind it and business and labor have jointly recognized the perils of soaring health care costs.
Nonetheless, the issue promises to be one of the liveliest of the 1985 legislative session, as various segments of Maryland's $4-billion-a-year health care industry, including hospitals, nursing homes and the state medical association, gear up to dilute or kill several parts of the package.
While Hughes aide Andy Wigglesworth argues that the legislation represents only an evolution of existing regulations, industry representatives such as Maryland Hospital Association president Dick Davidson see the potential for "regulatory overkill."
The hospital association will vigorously oppose the revenue cap, even though the trade association played an active part in the deliberations of the task force, which included in its membership three former association officers.
Davidson argues that the revenue cap -- renamed the "affordability limit" by the Hughes administration -- could actually prove to be a disincentive to cut hospital costs because institutions might scramble early in the year to boost their patient revenues through various medical procedures, fearing that the available revenue pool would be used up.
The state's 59 hospitals, both through their state association and through their boards of trustees, have enough political muscle that House Environmental Matters Committee Chairman Larry Young (D-Baltimore) predicts a "bloodbath" on the revenue cap bill.
Because the Hughes administration took nearly a month to introduce its legislation, the health care industry has had a running start in making its case to the legislature. Nursing home operators have already won a round, getting existing certificate-of-need applications for nursing home expansions removed from the moratorium bill even before it was introduced.
For their part, Maryland doctors are expected to oppose a bill that would force them to go through the certificate-of-need process before purchasing expensive equipment such as sophisticated scanners. John Sargeant, executive director of the state medical association, one of the most powerful political forces in Maryland, sees that legislation as the first step toward government regulation of physicians.
Proponents such as House Speaker Benjamin L. Cardin (D-Baltimore) fear that with seven distinct pieces of legislation, doctors and hospitals will be able to target their opposition to specific bills and torpedo the entire effort.
"It's a nice, neat package," said Cardin, "but if you take out any one factor, the whole pyramid can fall down. That is the danger."
That all of this is considered necessary in a state that has achieved marked progress in bringing its traditionally high medical costs into line with the national average is the result of growing pressures -- from the federal government, private insurers, business and labor -- to do even better.
Driving the effort in Maryland is the increasingly likely prospect that recent changes in the way the federal government pays the medical expenses of the elderly through the Medicare program will cost the state its exemption from federal Medicare rates.
Maryland's exemption, one of just four in the nation, allows the state to set uniform hospital rates for all classes of patients, regardless of whether their bills are paid by private insurers or the federal government.
That so-called "all-payer" system, in turn, ensures equal access by consumers to the state's hospitals. In contrast to many other states, Maryland has no hospitals that serve as dumping grounds for the poor who are dependent on Medicare or Medicaid or have no insurance at all.
Maryland has been allowed to set its own Medicare rates since 1977 by keeping the cost of treating Medicare patients below what it would have been without the exemption. Thus, since 1976, Maryland's cost per hospital day has fallen from 12 percent above the national average to 3 percent below the average. State health planners estimate that Maryland's exemption has saved $1.5 billion in health costs since 1977.
But last year, the federal government began phasing in a new method of paying the bills of Medicare recipients, one that does not apply in Maryland but which is slowing cost increases in other states and thereby setting a far more stringent national target that Maryland has had to meet. Rather than reimbursing hospitals based on actual costs of treatment after the fact, the Medicare program is now specifying in advance what it will pay doctors and hospitals for treating nearly 500 specific medical conditions.
At the same time, private insurers such as Blue Cross and Blue Shield, spurred by the business community's alarm at the soaring cost of providing employe health benefits, are also insisting on measures that reduce hospital stays and increase outpatient care.
The result, says Eugene Feinblatt, the chairman of the governor's task force on health care, has been "a profound impact on practice patterns." In short, people are spending less time in hospitals, and hospitals have to spread the fixed capital costs of those empty beds among fewer patients.
At Calvert Memorial Hospital, for example, administrator Constance Row estimates that the average patient is spending a full day less in the hospital than a year ago. "The typical example," says Row, "is an 86-year-old lady who falls down and suffers a hairline fracture. She used to be admitted for observation. Now, she can't be admitted because it's not considered acute care."
But Calvert Memorial is still faced with paying off the bonds that financed its $3.5 million expansion. Though 20 of the 53 new beds are part of a psychiatric unit that is paying its way, the cost of maintaining the empty fourth floor medical-surgical beds adds about $10 a day to the basic room rate.
To varying degrees, the same forces are at work at all Maryland hospitals, which logged 270,000 fewer patient days for the year ending in September 1984 than they did in the previous 12 month period. The governor's task force was told that the cost of maintaining the estimated 4,100 extra hospital beds ranges from $167 million to $231 million a year.
Driving out that excess capacity, and thereby reducing costs, is what the upcoming legislative exercise is all about.