Code Red for Maryland Hospitals

Sunday, February 25, 2001; Page B08

The recent blackouts in California highlight the problems that arise when a public utility is squeezed between its customers and its suppliers.

The fundamental problem is that California's utilities must provide services where prices are capped but costs are unregulated. Logic says that such a system is bound to come apart when energy prices begin escalating far faster than general inflation. Unfortunately, although the governor and state legislature were aware of the problem for months, the state took emergency action only when the long-predicted blackouts started to occur.

Many people don't realize that our nation's hospitals are in a similar situation. A decade of cost cutting by insurance companies, and the federal government effectively has created price controls on what health care providers can charge. Yet the costs of providing those services are exploding.

Although new drugs and technology can be life-savers for patients, they also are life-threatening to a hospital's bottom line. Meanwhile, nurses are getting harder to find at any salary.

A decade ago, it was felt that we had too many hospitals, and that they were inefficiently operated to boot. Consequently, in each year out of the past 10, hospitals have cut costs, closed beds, reduced lengths of stay, improved service and efficiency and moved procedures from the hospital to community-based settings. Now our hospitals are thinly staffed, yet the patients they treat are more critically ill than ever.

In Maryland alone, eight hospitals have closed, and the number of licensed beds has dropped by 20 percent. Industry profitability statewide has declined from a 4 percent margin in 1996 to a 0.7 percent margin in 2000.

Forty percent of Maryland acute-care hospitals had operating losses during the last fiscal year, compared with only 16 percent five years ago. And while there may be more operating efficiencies to be gained, it is increasingly hard to see where they might be found.

The irony is that even though they may be losing money, a number of our hospitals cannot keep up with demand. Emergency rooms are flooded. Many hospitals have no more intensive-care-unit beds.

Generally speaking, suburban hospitals are faring better than their urban counterparts, which treat the sickest patients and the greatest number of uninsured patients and bear the additional costs of working in an urban environment. Among this latter group are most academic medical centers; even some of the most renowned of these elite teaching hospitals are hemorrhaging financially.

Hospitals are public utilities that provide a vital service for the common good. We cannot give up modern medicine and go back to more invasive surgery, less effective drugs or poorly trained medical staff. But these advances cost money, and hospitals cannot continue to survive the squeeze.

It's time to recognize that the system penalizes those who are most important to the delivery of health care services. We must uncap reimbursement so that hospitals and doctors can be reimbursed fairly for their services. Otherwise the lights will go out in more of our best and most essential public utilities: the nation's hospitals.

-- William R. Brody is president of the Johns Hopkins University in Baltimore.

© 2001 The Washington Post Company

-- Swissrose (cellier3@mindspring.com), February 27, 2001