State health care leaders are closely watching a rate deregulation effort by the governor's office that may help some hospitals, but could ultimately increase costs to the privately insured.
"The governor has asked us to look at rural hospitals," said Parker Haddix, director of the state Health Care Authority.
One of the authority's duties is to regulate the prices state hospitals charge for patient services. West Virginia and Maryland are the only remaining states to regulate such rates.
"The governor sees this as a means to provide some financial relief for some of the rural, financially vulnerable hospitals in West Virginia," said Dan Page, a spokesperson for Gov. Cecil Underwood.
Citing a need to keep such hospitals solvent for economic development as well as public health reasons, Page said Underwood is considering freeing the rural hospitals to raise rates to the privately insured but has no set date for any announcement. Legislative activity is not required for rate deregulation.
Haddix said about 10 hospitals fit Underwood's initial criteria, which include federal classification as a rural provider, a high percentage of government-funded patients, a low number of short-term patients, and an above-average number of charity cases. He sent the list, which is not yet available to the media, to Underwood's office on Wednesday.
"The authority already exempted all the critical-access hospitals from rate setting two years ago," Haddix said of another federal classification of hospitals. There are eight such hospitals in the state, with Broaddus Hospital in Philippi and Grafton Hospital among them.
Deregulation allows them to offset some shortfalls caused by the 1997 federal Balanced Budget Act with higher bills to private insurers, Haddix said. Representatives from Davis Health Care Systems, Broaddus Hospital's parent company, have said that ability contributed to that institution opening a new building this month.
The state's 61 other hospitals have been hampered by not being able to cost shift in response to underpayment for services by Medicare/Medicaid and the state-run Public Employees Insurance Agency, according to John Law, state Hospital Association spokesperson. He said the governmental insurers pay about 97 cents on the dollar of what is actually spent by providers, causing a budget shortfall at some hospitals.
Law said the association is in favor of Underwood's plan. In 1999, the association pushed legislation that would have removed all regulating power from the authority. The legislation failed.
"It certainly gives you something to look at," Law said of the possibility of using the rural hospital deregulation as a model for complete deregulation.
But, Haddix said, there's only so much cost shifting these rural hospitals would be able to do, especially given their small percentage of privately insured patients.
"They're not going to be able to just jack the rates up," Haddix said. "The private insurers just aren't going to pay it."
Haddix said that larger private insurers, such as Blue Cross/Blue Shield, negotiate their own rates already.
Law agreed deregulation cannot erase the deficits caused by the Balanced Budget Act, noting only about 25 percent of patients statewide are covered by private insurance. However, he still believes it would help.
"It would alleviate the burden of going through the rate review process," Law said. "It would give hospitals a little more room to plan their budget and negotiate their contracts with payers -- to do those things that businesses do."
Wayne Griffith, chief executive officer of St. Joseph's Hospital of Buckhannon, is pleased with the possibility. While St. Joseph's is classified as rural, it is uncertain whether it is among those that might qualify under the governor's plan.
"We've worked long and hard to insure access in rural communities throughout West Virginia," Griffith said. "The West Virginia Hospital Association has spent a lot of time voicing concern over this issue for several years. I'm very pleased the governor has taken this initiative."
Regional editor Nora Edinger can be reached at 626-1403 or by e-mail at nedinger@exponent-telegram.com.
