Mid-Atlantic Health Law TOPICS

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"ARM" Twisting at the HSCRC

Recent proposals by payors have caused Maryland's Health Services Cost Review Commission (HSCRC) to review, to revise, and to reissue its policy relating to Alternative Rate Methodologies (ARMs). ARMs allow hospitals to bill payors on capitated, fixed, global or some other basis, as opposed to billing such payors according to a hospital's standard HSCRC-approved rates. To date, Maryland hospitals have obtained approval for over 100 ARMs. Nevertheless, the HSCRC estimates that less than 5% of regulated hospital revenue in Maryland derives from these specially approved rates. The HSCRC's restated policy states that ARMs must be consistent with the following criteria:

  1. There can be no cost-shifting from one payor to another.
  2. Access to the hospital may not be limited for any class of patients.
  3. Reduced payments must be cost-justified.
  4. Arrangements must be made available to any payor willing to meet substantially the same terms approved for the ARM.
  5. ARMs must allow for full funding of a hospital's uncompensated care and graduate medical education.
  6. No arrangement will be tolerated that is merely a disguised discount to a hospital's approved rates.

The HSCRC policy also identifies the last criterion as the "most important." Further, the policy states that applicants must supply evidence of the ARM's "reasonableness." For example, if a proposal is based upon cost savings stemming from a decrease in length-of-stay, then the applicant must demonstrate that the projected decrease is likely to be achieved, and why.


December 21, 1999




Rosen, Barry F.


Health Care