An alternate approach to hospital cost control: the Rochester project

The rapid escalation in health care costs has demonstrated a need to control costs in general and hospital costs in particular. In New York State, efforts at control have followed one of several paths, including reduction of Medicaid program expenditures, elimination of hospital beds, and prospective reimbursement of hospital costs. Although some success has been achieved in each of these areas, hospital costs containment has not been as successful as had been hoped. A new project called MAXICAP, being developed in the Rochester region, seeks to link payment with regional hospital planning. MAXICAP represents a voluntary attempt by hospitals, third party payers, planners, consumers, and governmental agencies to devise a prospective hospital payment system. Under this system community hospital plans in the Rochester region would be integrated and a cap imposed on both revenues and expenses for acute hospital care. The principal advantage of the MAXICAP is that it offers a mechanism for linking hospital planning with payment functions on a regional basis. The principal disadvantage is that the success of the MAXICAP depends upon the voluntary cooperation of the vast majority of the acute care hospitals in the area--hospitals that may be scattered throughout a relatively large region.