Overview of Maryland Regulatory System for Hospital Oversight

In Maryland, hospitals are regulated by several agencies:

• The Maryland Health Care Commission (MHCC) administers the certificate of need (CON) program.
• The Office of Health Care Quality (OHCQ) in the Department of Health and Mental Hygiene (DHMH) oversees licensing requirements.
• The Health Services Cost Review Commission (HSCRC) regulates the rates hospitals can charge for care.

Certificate of Need Program

The MHCC Certificate of Need (CON) program is designed to make sure that new health care services and facilities are developed only as needed. This decision is made based on measures that have been developed with public input. For each proposal, the MHCC considers the following:

• Cost-effectiveness
• Quality of care
• Geographic access to care
• Financial access to care

The State Health Plan lists policy goals and service-specific standards that are used for reviewing proposed projects. The MHCC oversees, monitors, and responds to the effects of changes in the state health care system influenced by the marketplace. This public participation enables the MHCC to determine whether proposed health care projects address the community's health care priorities and are in the public interest.

The CON program oversees the following health care providers:

• Acute-care general hospitals.
• Specified acute-care services including obstetrics, pediatrics, and acute psychiatry.
• Special hospitals (chronic, psychiatric, rehabilitation, and pediatric).

A CON approval is required before the following changes can take place:

• A new health care facility is built, developed, or established.
• An existing or previously approved, but unbuilt, health care facility is moved to another site.
• The bed capacity of a health care facility is changed.
• The type or scope of any health care service is changed, if the health care service is offered by a health care facility.
• Capital expenditures are made by or on behalf of a health care facility.

Licensing for Health Care Facilities

Within the Department of Health and Mental Hygiene (DHMH), the Office of Health Care Quality (OHCQ) licenses or certifies various health care facilities and services in Maryland. The OHCQ’s Hospital Unit is legally required to evaluate all hospitals, and to investigate and respond to all consumer complaints. OHCQ is responsible for licensing and certifying hospitals that participate in the Medicare program.

The Joint Commission on Accreditation of Healthcare Agencies (JCAHO) approves all acute-care hospitals. JCAHO is an independent, not-for-profit group that evaluates and accredits health care organizations and programs in the United States. JCAHO surveys accredited hospitals every three years. It also evaluates nursing homes and home health agencies.

Once a hospital has received JCAHO accreditation, the federal government approves it to be a Medicare provider, and Maryland renews the hospital’s license. Maryland does not require the OHCQ to review a hospital that the JCAHO has accredited, unless a specific situation, such as a complaint, creates the need for such a review.

Setting Hospital Rates

The Health Services Cost Review Commission (HSCRC) was established by the Maryland General Assembly in 1971. The seven-member commission reviews and approves rates that hospitals can charge for their services. The HSCRC also provides financial information about Maryland hospitals to the public.

Based on a federal waiver from Medicare, the HSCRC sets rates for all payers: private insurance companies, HMOs, Medicare, and Medicaid. This system is referred to as the "all-payer" system because all payers pay for their fair share of hospital costs.

In establishing the HSCRC, the Maryland General Assembly wanted to meet the following needs:

• Keep hospital services affordable.
• Expand access to hospital care for those without insurance.
• Provide accountability for hospital performance to the public and state government.

Since 1974, the HSCRC has saved Marylanders about $1.3 billion in hospital costs by keeping the growth in cost per admission below the national rate. Setting its own fees for health care services also enables Maryland to cover reasonable costs to those who cannot pay, known as uncompensated care. In 2000, $469 million was included in rates for uncompensated care. As a result, Maryland has no need for public hospitals.

Maryland is the only State in the country that has a Medicare Waiver. Under this agreement, Medicare reimburses Maryland hospitals according to HSCRC rates.