Governor eliminates price restrictions on hospitals

Friday, Jan. 29, 1999 | 11:36 a.m.

CARSON CITY -- Gov. Kenny Guinn is going to scrap price regulations on major Nevada hospitals, which once had the highest patient bills in the nation.

Guinn has decided against renewing the so-called "charge master" program, which limited yearly increases in charges at for-profit hospitals in Clark and Washoe counties.

The law, enacted in 1991 at the urging of Gov. Bob Miller, automatically expires every two years. But each time the deadline neared, Miller called on the Legislature to renew it.

It expires July 1, and state Human Resources Director Charlotte Crawford said Thursday the Guinn administration won't propose that it be continued. "The mechanism is no longer an effective vehicle to address hospital costs," she said.

The law permits the so-called "Big Five" hospitals to boost rates according to the annual medical price index. For this fiscal year starting last July, it was 2.7 percent.

Crawford said the law worked as Nevada dropped from having the highest hospital costs in the nation to a ranking of around 10th. She said Guinn will want to have discussions about whether there are other ways to regulate costs.

Sen. Joe Neal, D-North Las Vegas, one of the leaders in controlling costs of health care a decade ago, said Guinn "is not doing the right thing, and this will lead to patient gouging."

"It's the wrong policy to set," Neal said. "It's doing a disservice to the state and people."

Bill Welch, president of the Nevada Association of Hospitals and Health Care, could not be reached for comment.

The cost-containment law applies to Columbia, Desert Springs and Valley hospitals in Las Vegas and Washoe Medical and St. Mary's in Washoe County. It prohibits the price of every item, whether it be aspirin, washcloths or a room, from being raised annually more than the medical price index unless special permission is granted by the state.

In addition, an annual limit was placed on bill charges to a patient. Crawford said the industry has changed since 1991, and very few people pay bill charges now. Most patients have insurance, Medicare or some other type of agreement in which their rate is lower than the billed charge, she said.

For example, unions or insurance companies may negotiate a reduced rate with hospitals in exchange for sending their members or customers there.

"Times have changed," Crawford said. "A small percentage of individuals arrange payments on bill charges. Most are third-party payers." Those who pay the full cost or bill charged are entitled to a 30 percent discount under the law.

The law, Crawford said, "was successful. We are no longer ranked number one. It did control costs. However, the hospital business shifted."

Neal says that without some regulation, hospital charges will shoot up again. "Senior citizens should be concerned. We still have one of the highest costs in the nation."

"To leave health care to be controlled by demand and supply is ill-advised. You have to put in some restrictions," Neal said.

He said the people may have to petition the federal government to come in and control prices, but he admitted, "That would be very difficult, at best."

In the mid-1980s, Democratic Gov. Richard Bryan, now in the U.S. Senate, started a drive to control hospital costs and restrictions were imposed. But after some success, prices started to climb again. Miller considered creating a commission to regulate prices, much like the state Public Service Commission did on utilities.

The governor and the hospital industry reached an agreement in January 1991 under which patient costs would be frozen for 18 months and the five major for-profit hospitals would be limited each year to price increases based on the medical cost of living index.

In 1992, hospitals were permitted to boost rates by 7.8 percent, but that has slowly decreased to the 2.7 percent allowed last July.

Hospital profits in 1993 reached $71.3 million and rose to as much as $93.8 million in fiscal 1997. But profits dropped in 1998 to $47.8 million.

The disclosure that Guinn would not continue the cost-containment law came Thursday during a review by legislative committees of the budget of the state Division of Health Care Financing and Policy.

The two workers who oversee hospital costs have been eliminated from the budget effective in July.