Hospitals concerned about state rate-setting proposal

But hospitals also want the state to keep the Medicare waiver, so it will have to come to some consensus, he said. Losing the waiver would mean a loss of around $1 billion in annual hospital revenue.

"The health care industry is getting more money out of Medicare than they would have without the waiver," said Antos. "If there is a time to show solidarity, it is critical now."

State officials worked with hospitals and insurers on the application over several months. Sharfstein said they will continue to talk about the plan and could make changes.

Dr. John Chessare, president and CEO of Greater Baltimore Medical Center in Towson, said the proposal unnerves some hospitals because it calls for a totally different way of doing business.

"They have to morph themselves into an entity that manages the care of a person and doesn't wait for them to get sick," Chessare said. "Nobody has seen their role in this expanded light. That is why everybody is scared, because they need to become a new entity."

Chessare said GBMC has begun moving toward more preventive care, but the change in approach is taking time. The hospital created a network of 100 primary care personnel under its umbrella, but most of the revenue still comes from hospital care rather than physician care, Chessare said.

"We are scared about the payment system not changing fast enough," he said.

He said hospitals support the goals of the state to cut costs and improve care, but more discussion is needed.

"We are aligned around the goal," Chessare said. "The question is how fast can we get there and what are the rules."

Coyle, of the Maryland Hospital Association, said the plan contains new approaches that haven't been tried in other places.

"There is certainly room within Maryland's health care system overall to continue to reduce costs; hospitals are doing that every day," she said. "I think what we are talking about here are very new approaches that haven't been tried in other places.

"This is truly on the edge of policy experimentation," she said.

Coyle and others said more details would help hospitals figure out the ramifications of the plan.

"These are unchartered waters," said John Topper, CFO of Mercy Medical Center in Baltimore. "There is a scary part and exciting part. We have all these ideas on how to manage total population health, but the question is how it will be put in place and what incentives we will get for doing it."

Topper said he hoped the state would consider rate increases to offset hospitals seeing fewer patients. It would be difficult to make up the difference entirely through cuts, he said.

"If they are going to reduce volume growth, they will have to provide some balance in the rate increase," Topper said.

The state's Health Services Cost Review Commission, which sets hospital rates, would be responsible for hammering out a lot of the details under the state's plan. Sharfstein said state officials wanted to leave some flexibility in the process.

"There is a strategic decision not to hard-wire the application with a lot of commitments," Sharfstein said.

But Burrell, of CareFirst BlueCross BlueShield, said it is possible to be too vague.

"We're not taking the view that you have to do this in a straightjacket and tell us every little thing," Burrell said. "You can't be so vague in terms of being flexible that we don't know what we're going to do."